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Performance pay, risk attitudes and job satisfaction

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  • Cornelissen, Thomas
  • Heywood, John S.
  • Jirjahn, Uwe

Abstract

We present a model in which workers with greater ability and greater risk tolerance move into performance pay jobs to capture rents and contrast it with the classic agency model. Estimates from the German Socio-Economic Panel confirm testable implications drawn from our model. First, before controlling for earnings, workers in performance pay jobs have higher job satisfaction, a proxy for on-the-job utility. Second, after controlling for earnings, workers in jobs with performance pay have the same job satisfaction as those not in such jobs. Third, those workers in performance pay jobs who have greater risk tolerance routinely report greater job satisfaction. While these findings support models in which workers capture rent, they would not be suggested by the classic agency model.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 18 (2011)
Issue (Month): 2 (April)
Pages: 229-239

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Handle: RePEc:eee:labeco:v:18:y:2011:i:2:p:229-239

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Web page: http://www.elsevier.com/locate/labeco

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Keywords: Performance pay Worker heterogeneity Ability Risk preferences Sorting;

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References

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Citations

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Cited by:
  1. Keith Bender & Colin Green & John Heywood, 2012. "Piece rates and workplace injury: Does survey evidence support Adam Smith?," Journal of Population Economics, Springer, vol. 25(2), pages 569-590, January.
  2. Verena Dill & Uwe Jirjahn & Georgi Tsertvadze, 2011. "Residential Segregation and Immigrants' Satisfaction with the Neighborhood in Germany," SOEPpapers on Multidisciplinary Panel Data Research 410, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Pfeifer, Christian, 2008. "A Note on Risk Aversion and Labour Market Outcomes: Further Evidence from German Survey Data," IZA Discussion Papers 3523, Institute for the Study of Labor (IZA).
  4. Stefanec, Noah Patrick, 2010. "Incentive pay: Productivity, sorting, and adjacent rents," The Journal of Socio-Economics, Elsevier, vol. 39(2), pages 171-179, April.
  5. 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.
  6. Katrin Sommerfeld, 2012. "Higher and Higher?: Performance Pay and Wage Inequality in Germany," SOEPpapers on Multidisciplinary Panel Data Research 476, DIW Berlin, The German Socio-Economic Panel (SOEP).
  7. Colin Green & John Heywood, 2012. "Don't Forget the Gravy! Are Bonuses and Time Rates Complements?," Working Papers 13424023, Lancaster University Management School, Economics Department.
  8. Benjamin Artz, 2010. "Fringe benefits and job satisfaction," International Journal of Manpower, Emerald Group Publishing, vol. 31(6), pages 626-644, September.
  9. Fidan Ana Kurtulus & Douglas Kruse & Joseph Blasi, 2011. "Worker Attitudes Towards Employee Ownership, Profit Sharing and Variable Pay," UMASS Amherst Economics Working Papers 2011-15, University of Massachusetts Amherst, Department of Economics.
  10. Pouliakas, Konstantinos & Theodoropoulos, Nikolaos, 2009. "Performance Pay as an Incentive for Lower Absence Rates in Britain," MPRA Paper 18238, University Library of Munich, Germany.
  11. Romina Gambacorta & Maria Iannario, 2012. "Statistical models for measuring job satisfaction," Temi di discussione (Economic working papers) 852, Bank of Italy, Economic Research and International Relations Area.
  12. Hammermann, Andrea & Mohnen, Alwine, 2012. "Who Benefits from Benefits? Empirical Research on Tangible Incentives," IZA Discussion Papers 6284, Institute for the Study of Labor (IZA).
  13. Thomas Cornelissen & John S. Heywood & Uwe Jirjahn, 2010. "Profit Sharing and Reciprocity: Theory and Survey Evidence," SOEPpapers on Multidisciplinary Panel Data Research 292, DIW Berlin, The German Socio-Economic Panel (SOEP).

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