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High-Powered Performance Pay and Crowding out of Non-Monetary Motives

Author

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  • Huffman, David B.

    (University of Pittsburgh)

  • Bognanno, Michael L.

    (Temple University)

Abstract

A previous literature cautions that paying workers for performance might crowd out non-monetary motives to work hard. Empirical evidence from the field, however, has been based on between-subjects designs that are best suited for detecting crowding out due to low-powered incentives. High-powered incentives in the workplace tend to increase output, but it is unknown whether this masks crowding out. This paper uses a within-subject experimental design and finds evidence that crowding out also extends to high-powered incentives, in a real work setting with paid workers. There is individual heterogeneity, however, with a minority of workers report crowding in of motivation. Thus, the impact of performance pay might depend on the mix of worker types.

Suggested Citation

  • Huffman, David B. & Bognanno, Michael L., 2018. "High-Powered Performance Pay and Crowding out of Non-Monetary Motives," IZA Discussion Papers 11920, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11920
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    Cited by:

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    2. Megumi Suto & Hitoshi Takehara, 2022. "Employee‐oriented corporate social responsibility, innovation, and firm value," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(4), pages 765-778, July.
    3. Sara Cabanas & Teresa Proença & Mauro Carozzo-Todaro, 2020. "Pay for Individual Performance: Aiding or Harming Sustainable Intrinsic Motivation?," Sustainability, MDPI, vol. 12(16), pages 1-13, August.
    4. Brosig-Koch, Jeannette & Hennig-Schmidt, Heike & Kairies-Schwarz, Nadja & Kokot, Johanna & Wiesen, Daniel, 2020. "Physician performance pay: Experimental evidence," HERO Online Working Paper Series 2020:3, University of Oslo, Health Economics Research Programme.
    5. Kathrin Manthei & Dirk Sliwka & Timo Vogelsang, 2021. "Performance Pay and Prior Learning—Evidence from a Retail Chain," Management Science, INFORMS, vol. 67(11), pages 6998-7022, November.

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    More about this item

    Keywords

    intrinsic motivation; incentives; non-cognitive skills; experiment;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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