Compensation practices, worker mobility, and wage dispersion: evidence from Brazilian employer-employee matched data
with Chris Cornwell and Ian Schmutte Abstract
It is increasingly accepted that firms play an important role in stories of rising wage inequality, but the nature of that role is not well understood. Recent evidence from the US and Germany points to growing disparities in pay between firms as the source of the problem, rather than within-firm pay variance, which has changed relatively little. One possible explanation is that the heterogeneous application of modern management practices has led to increasing firm-specific productivity differences, which, in turn, may have induced a greater degree of worker sorting. In this paper, we explore this possibility using matched employer-employee data from Brazil’s from Relação Anual de Informações Sociais (RAIS) linked to the manufacturing firms covered in the World Management Survey (WMS). Using the RAIS data, we characterize different personnel management profiles that firms use to affect recruiting, motivation, and retention of high-quality workers. With the WMS data, we examine how different personnel management profiles are associated with management quality. In a labor market characterized by search frictions, asymmetric information about worker productivity and shirking, firms should alter the level and sequencing of pay, as well as their portfolio of short and long-term contracts. In Brazil, institutions strongly favor incumbent workers, compounding these management issues. Nevertheless, firms are able to set the level and sequencing of pay, contract types, and termination policies to improve performance. These management practices will alter the sorting of workers with different levels of ability in and out of the firm, along with the observed wage-tenure profile. Therefore, whether workers end up employed in high-paying firms is both a matter of luck, from their perspective, but also related to managerial quality and firm performance. We show that the heterogeneity in pay across firms has two key components that have been conflated in prior work: a level component and a tenure component, both of which can vary across occupations, and drift over time. Because they are associated with management practices aimed at recruiting and retaining talented workers, they also help explain observed increases in sorting between high-wage workers and high-wage firms.
Developing Management: an expanded evaluation tool for developing countries, RISE Working Paper 7
with Renata Lemos Abstract
In recent years, there has been striking evidence showing a large tail of badly managed schools and hospitals in developing countries across a number of management areas such as operations management, performance monitoring, target setting and people management. But where exactly, along the process of setting their management structures, are these organizations failing? This paper presents new evidence from an expanded survey tool based on the World Management Survey instrument. We collect detailed data using face-to-face interviews in settings where weak management practices prevail and observe more variation in the left tail of the distribution. Using this data, we explore three main sub-topics within each management area: (1) process execution and implementation, (2) process usage frequency, (3) process monitoring efficiency and frequency. We have collected data with schools in India and Mexico and are working with teams surveying schools in Colombia and hospitals in China and India.
A snapshot of mid-sized firms in Africa, Asia and Latin America: evidence from the World Management Survey, LSE Mimeo
with Renata Lemos Abstract
This report provides a basic set aggregate descriptive data at the country-level collected through the World Management Survey waves, including management practices, work-life balance practices, human capital, decentralization and available infrastructure in medium- and large-sized firms in Africa, Asia, and Latin American developing countries. It also describes the data collection process in great detail. As the database becomes increasingly used by researchers, we hope this report can serve as an “expanded methodology and data manual” for the WMS, where we not only detail the data collection process but also include an Appendix on the construction of the sampling frames. This is particularly important for countries and sectors where we could not find a publicly available list, so we note the challenges of data collection in these countries and how we approached the solutions to these challenges.