"This paper examines the contribution of firm-level pay setting to wage inequality in Belgium, a country with strong labour institutions and low overall wage dispersion. On the basis of rich linked employer-employee data (2003-2022), firm premia account for 10-30% of total wage inequality, depending on controls for worker heterogeneity. While overall inequality has declined, inter-firm pay differences have remained stable or grown. Working in lower-paying firms accounts for around an eighth of the gender pay gap between similar workers, and up to a fifth of the pay gap experienced by third country nationals. The majority of this reflects work being carried out in sectors that are themselves lower-paying ones. The relatively limited, but non-negligible, role of firm pay setting in wage inequality in Belgium is likely to reflect strong sectoral wage bargaining and regulation."

Support: Digital;Paper

ISBN (PDF) : 1994-4454

Legal deposit : D/2025/10.574/26