Pay incentives, intangibles, and gender wage inequality

Abstract

This research focuses on the effects of incentive pay schemes (IPSs) on the within-establishment gender wage gap and explores whether the intensity of intangible capital at the industry level moderates such effects. To this aim, we use establishment-level data from various waves (from 2006 to 2018) of the SES – Structure of Earning Surveys for the five largest European economies (Germany, France, Italy, Spain, and the UK). Data on intangible capital stocks (on 25 industries) are from the EU-KLEMS database. The analysis, which addresses potential endogeneity issues, indicates that more pervasive use of IPSs alleviates the adjusted gender pay gap. However, this inequality-attenuating effect of IPSs materialises only in contexts where intangible capital intensity is low. The result is confirmed if we replicate the analysis in subsamples of establishments belonging to industries with high/low intensity of various intangible capital components, but training emerges as a notable exception.