The impact of within-firm pay disparity on workplace accidents

Based on a detailed and novel database including more than 40,000 firms and more than 2.4 million employees, we analyze the impact of vertical pay disparity on the magnitude of workplace accidents. Greater pay disparity has been associated with higher- powered incentives to compete for better-paid positions, which may increase workers’ willingness to take risks. We find that the number of days lost –as consequence of workplace accidents– is increasing in the level of pay disparity and that this relationship is negatively moderated by the proportion of female employees and by the state-ownership of companies, showing that the willingness to take risks varies by gender and by the incentives implied in different ownership structures. Our results also show that different wage layers respond differently to pay disparity. We highlight the need to consider costs that are usually hidden when analyzing the benefits of different compensation structures and to analyze the effects of these structures at different organizational layers.