20.500.12556/RUL-184406 Intra-firm pay dispersion and firm performance incentive for current or sorting of prospective workers Purpose - This article investigates how intra-firm pay dispersion affects firm performance, distinguishing between vertical (across hierarchical levels) and horizontal (within occupational groups) pay differentials. It explores whether the impact arises from incentive effects for current employees or from the sorting effect through employee mobility, with a focus on managers and experts. Design/methodology/approach - The study uses matched employer–employee microdata for Slovenian firms from 2006 to 2016. Firm performance is measured as value added per employee. Both static fixed-effects panel regressions and dynamic system Generalized Method of Moments (GMM) estimations are applied to disentangle direct (incentive) and indirect (sorting) effects of pay dispersion, while accounting for endogeneity and persistence in productivity. Findings - The article finds robust evidence in both static and dynamic frameworks of a significant positive effect of horizontal pay dispersion among experts on firm labour productivity, driven by both incentive effects for current employees and sorting effects for prospective workers. The effect is amplified when the initial level of dispersion is lower. Evidence on vertical pay dispersion is less conclusive: while static results indicate a positive association mainly through incentives for current employees, the dynamic analysis does not confirm a causal link with productivity. Overall, the findings suggest that moderate pay dispersion – particularly among experts – enhances firm productivity without necessarily undermining equity in a low-inequality setting, whereas managerial turnover has the most adverse effects on performance. Research limitations/implications - Results indicate that moderate pay dispersion can foster firm productivity without necessarily undermining equity in a low-inequality setting. Originality/value - The article contributes by jointly examining vertical and horizontal pay dispersion, distinguishing between incentive and sorting effects, and contrasting outcomes for managers and experts. Using comprehensive linked employer–employee data allows for a rare large-scale test of compensation strategies and labour mobility in a low-inequality institutional context. enterprises level of employment job mobility company performance salaries Slovenia pay dispersion employee mobility firm performance sorting effect podjetje zaposlenost zaposlitvena mobilnost poslovanje podjetja plače Slovenija true false true Angleški jezik Slovenski jezik Članek v reviji 2026-07-06 14:50:17 2026-07-06 14:53:58 2026-07-07 04:17:47 0000-00-00 00:00:00 2026 0 0 Str. 133-151 iss. 10 Vol. 47 2026 0000-00-00 Zaloznikova Objavljeno NiDoloceno 0000-00-00 0000-00-00 0000-00-00 658.3 0143-7720 10.1108/IJM-08-2025-0677 278698755 ijm-08-2025-0677en.pdf ijm-08-2025-0677en.pdf 1 9F63F62AFD8370DA69FA20AD5CA7D109 943fe99c9bfc03119d48d103231dbebcc8fa23a1cc8728377ce8e8ffa44086a8 837d057c-7939-11f1-9b0d-0050569b8976 https://repozitorij.uni-lj.si/Dokument.php?lang=slv&id=237140 https://www.emerald.com/ijm/article/47/10/133/1367049/Intra-firm-pay-dispersion-and-firm-performance 0 88f2ba1a-7939-11f1-9b0d-0050569b8976 https://repozitorij.uni-lj.si/Dokument.php?lang=slv&id=237141 Ekonomska fakulteta 0 0 0