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Does Performance Pay Increase Job Satisfaction?

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Author Info
COLIN GREEN
JOHN S. HEYWOOD

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Abstract

This paper investigates the influence of performance-related pay on several dimensions of job satisfaction. In cross-sectional estimates performance-related pay is associated with increased overall satisfaction, satisfaction with pay, satisfaction with job security and satisfaction with hours. It appears to be negatively associated with satisfaction with the work itself; yet, after accounting for worker fixed effects the positive associations remain and the negative association vanishes. These results appear robust to a variety of alternative specifications and support the notion that performance-related pay allows increased opportunities for worker optimization and does not generally demotivate workers or crowd out intrinsic motivation. Copyright (c) The London School of Economics and Political Science 2007.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0335.2007.00649.x
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Publisher Info
Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 75 (2008)
Issue (Month): 300 (November)
Pages: 710-728
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Handle: RePEc:bla:econom:v:75:y:2008:i:300:p:710-728

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  1. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2009. "Rewarding Carrots & Crippling Sticks: Eliciting Employee Preferences for the Optimal Incentive Mix in Europe," MPRA Paper 14167, University Library of Munich, Germany. [Downloadable!]
  2. John S Heywood & Colin Green, 2007. "Are flexible contracts bad for workers? Evidence from job satisfaction data," Working Papers 005276, Lancaster University Management School, Economics Department. [Downloadable!]
  3. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2009. "Confronting Objections to Performance Pay: A Study of the Impact of Individual and Gain-sharing Incentives on the Job Satisfaction of British Employees," MPRA Paper 14244, University Library of Munich, Germany. [Downloadable!]
  4. John S Heywood & Colin Green, 2008. "Profit Sharing and the Quality of Relations with the Boss," Working Papers 005698, Lancaster University Management School, Economics Department. [Downloadable!]
  5. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2005. "Socio-Economic Differences in the Satisfaction of High-Pay and Low-Pay Jobs in Europe," MPRA Paper 16733, University Library of Munich, Germany, revised 10 Aug 2009. [Downloadable!]
  6. Thomas Cornelißen & John S. Heywood & Uwe Jirjahn, 2008. "Performance Pay, Risk Attitudes and Job Satisfaction," SOEPpapers 136, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
  7. Böckerman, Petri & Johansson, Edvard & Kauhanen, Antti, 2009. "Innovative Work Practices and Sickness Absence: What Does a Nationally Representative Employee Survey Tell?," MPRA Paper 17872, University Library of Munich, Germany. [Downloadable!]
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