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Do Salaries Improve Worker Performance?

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  • Alex Bryson
  • Babatunde Buraimo
  • Rob Simmons

Abstract

We establish the effects of salaries on worker performance by exploiting a natural experiment in which some workers in a particular occupation (football referees) switch from short-term contracts to salaried contracts. Worker performance improves among those who move onto salaried contracts relative to those who do not. The finding is robust to the introduction of worker fixed effects indicating that it is not driven by better workers being awarded salary contracts. Nor is it sensitive to workers sorting into or out of the profession. Improved performance could arise from the additional effort workers exert due to career concerns, the higher income associated with career contracts (an efficiency wage effect) or improvements in worker quality arising from off-the-job training which accompanies the salaried contracts.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1019.

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Date of creation: Oct 2010
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Handle: RePEc:cep:cepdps:dp1019

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: incentives; salaries; productivity; sports;

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  15. Arijit Mukherjee, 2010. "The optimal disclosure policy when firms offer implicit contracts," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 549-573.
  16. Babatunde Buraimo & David Forrest & Robert Simmons, 2010. "The 12th man?: refereeing bias in English and German soccer," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 173(2), pages 431-449.
  17. Kenneth S. Corts, 2007. "Teams versus individual accountability: solving multitask problems through job design," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 467-479, 06.
  18. Dobson,Stephen & Goddard,John, 2011. "The Economics of Football," Cambridge Books, Cambridge University Press, number 9780521517140, April.
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