A General Test for Distortions in Performance Measures
AbstractResults from the incentive literature suggest that performance measures are often distorted, eliciting dysfunctional and unintended responses. The existence of these responses, however, is difficult to demonstrate in practice because this behavior is typically hidden from the researcher. We present a simple model showing that one can test for the existence of distortions by estimating the change in the association between a performance measure and the true goal of the organization with the measure's introduction. Using data from a public-sector organization, we find evidence consistent with the existence of distortions. We draw implications for the selection of performance measures. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by MIT Press in its journal The Review of Economics and Statistics.
Volume (Year): 90 (2008)
Issue (Month): 3 (August)
Contact details of provider:
Web page: http://mitpress.mit.edu/journals/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Randolph Sloof & Mirjam van Praag, 2008. "The Degradation of Distorted Performance Measures," Tinbergen Institute Discussion Papers, Tinbergen Institute 08-072/3, Tinbergen Institute.
- Gibbs, Michael, 2012. "Design and Implementation of Pay for Performance," IZA Discussion Papers 6322, Institute for the Study of Labor (IZA).
- Randolph Sloof & Mirjam van Praag, 2014. "Testing for Distortions in Performance Measures: An Application to Residual Income Based Measures like Economic Value Added," Tinbergen Institute Discussion Papers, Tinbergen Institute 14-056/V, Tinbergen Institute.
- Carolyn J. Heinrich & Gerald Marschke, 2010. "Incentives and their dynamics in public sector performance management systems," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 29(1), pages 183-208.
- Sloof, Randolph & van Praag, C. Mirjam, 2010. "The effect of noise in a performance measure on work motivation: A real effort laboratory experiment," Labour Economics, Elsevier, Elsevier, vol. 17(5), pages 751-765, October.
- Michiel Bijlsma & Pierre Koning & Victoria Shestalova, 2013. "The Effect of Competition on Process and Outcome Quality of Hospital Care in the Netherlands," De Economist, Springer, Springer, vol. 161(2), pages 121-155, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick).
If references are entirely missing, you can add them using this form.