Why Do Some Firms Pay More? An Empirical Investigation of Inter-Firm Wage Differentials

The paper tests implications of efficiency wage theories, agency theories and union bargaining theory on Norwegian micro data. Firm specific means of individual characteristics as well as other firm characteristics are utilized to study the nature of high paying firms vs. lower paying firms. The study finds evidence in favor of all three types of non-market clearing models. Firms do not distinguish between workers with different levels of autonomy or union status in their wage setting. However, firms with a higher average level of employees' autonomy or union density pay better. Human capital effects, on the other hand, originate autonomy or union density pay better. Human capital effects, on the other hand, originate within firms. Wage enhancing mechanisms from each type of theory do not reinforce eachother: higher wages may serve several purposes in any one firm.