Working in Family Firms: Less Paid but More Secure?Evidence from French Matched Employer-EmployeeData

We study compensation packages in family and non-family firms. Using matched employeremployeedata for a representative sample of French establishments, we first show thatfamily firms pay on average lower wages to their workers. We find that part of this wage gapis due to differences in unobserved characteristics of workers across family and non-familyfirms. However, we also find evidence that company wage policies differ according toownership status, so that workers staying in the same firm enjoy on average a 3% payincrease when a family firm becomes non-family owned and suffer a similar pay drop whenthe ownership transition occurs the other way round. In contrast, we find evidence that familyfirms are characterised by lower job insecurity, as measured by dismissal rates and by thesubjective risk of dismissal perceived by workers. In addition, family firms appear to rely lesson dismissals – and more on hiring reductions – than non-family firms when they downsize.We show that compensating wage differentials account for a substantial part of the inverserelationship between the family/non-family gaps in wages and job security....