The Optimal Wage Inequality Within Enterprises And Its Determinants

Wage inequality within an enterprise shows the incentive intensity on workers, which has multidimensional effect on performance of enterprise through affecting workers’efforts. Using data of mostly private enterprises in Guangxi province, this paper finds that there exists optimal wage inequality, which maximizes the enterprise’s profit. Furthermore, this paper also finds the impact of wage inequality on profitability depends on firm size and employees’average education level.