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Performance Pay and the White-Black Wage Gap

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  • John S. Heywood
  • Daniel Parent

Abstract

We show that the reported tendency for performance pay to be associated with greater wage inequality at the top of the earnings distribution applies only to white workers. This results in the white-black wage differential among those in performance pay jobs growing over the earnings distribution even as the same differential shrinks over the distribution for those not in performance pay jobs. We show that this remains true even when examining suitable counterfactuals that hold observables constant between whites and blacks. We explore reasons behind our finding focusing on the interactions between discrimination, unmeasured ability, and selection.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 30 (2012)
Issue (Month): 2 ()
Pages: 249 - 290

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Handle: RePEc:ucp:jlabec:doi:10.1086/663355

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Citations

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Cited by:
  1. Méon, Pierre-Guillaume & Szafarz, Ariane, 2011. "The modern corporation as a safe haven for taste-based discrimination: An agency model of hiring decisions," Labour Economics, Elsevier, vol. 18(4), pages 487-497, August.
  2. Ghazala Azmat & Rosa Ferrer Zarzuela, 2012. "Gender gaps in performance: Evidence from young lawyers," Economics Working Papers 1300, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2012.
  3. Nicole Fortin & Thomas Lemieux & Sergio Firpo, 2010. "Decomposition Methods in Economics," NBER Working Papers 16045, National Bureau of Economic Research, Inc.
  4. Merlino, Luca Paolo, 2012. "Discrimination, technology and unemployment," Labour Economics, Elsevier, vol. 19(4), pages 557-567.
  5. Maury Gittleman, & Brooks Pierce,, 2013. "Pay for Performance and Compensation Inequality: Evidence from the ECEC," Working Papers 465, U.S. Bureau of Labor Statistics.
  6. K. Sommerfeld, 2013. "Higher and higher? Performance pay and wage inequality in Germany," Applied Economics, Taylor & Francis Journals, vol. 45(30), pages 4236-4247, October.
  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. Richard Fabling & Arthur Grimes & David C. Maré, 2012. "Performance Pay Systems and the Gender Wage Gap," Working Papers 12_13, Motu Economic and Public Policy Research.
  9. Colin P. Green & John S. Heywood & Nikolaos Theodoropoulos, 2012. "Performance Pay and Ethnic Wage Differences in Britain," University of Cyprus Working Papers in Economics 06-2012, University of Cyprus Department of Economics.

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