Pay transparency and entrepreneurship

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Pay transparency and entrepreneurship

Shang, Longfei; Saffar, Walid

Journal of banking & finance, 20/May , Volume: 162

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Using the staggered adoption of U.S. state-level pay transparency laws that improve pay transparency, we find that the probability of high-wage workers becoming entrepreneurs significantly increases following the adoption of such laws. Moreover, the salaries of high-wage workers significantly increase following the laws’ passage. These findings are consistent with theory suggesting that improved pay transparency increases the relative return of entrepreneurship for high-wage workers.

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