Don't Forget the Gravy! Are Bonuses and Time Rates Complements?
AbstractThe press often depicts bonuses as extra payments to the already well compensated and calls for reform. Yet, these calls typically ignore the efficiency argument that bonuses are potentially risky performance pay that substitute for salary compensation. This paper uses representative UK data to estimate that bonuses appear not to substitute for salary in cross-sectional estimates. Yet, when controlling for time invariant characteristics in panel data, bonuses emerge as substitutes. Each pound of bonus comes at a cost of 40 pence in other earnings. The degree of substitution is far larger at the bottom of the earnings distribution and far smaller at the top of the earnings distribution.
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 InfoPaper provided by Lancaster University Management School, Economics Department in its series Working Papers with number 13424023.
Date of creation: 2012
Date of revision:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Méon, Pierre-Guillaume & Szafarz, Ariane, 2011.
"The modern corporation as a safe haven for taste-based discrimination: An agency model of hiring decisions,"
Elsevier, vol. 18(4), pages 487-497, August.
- Pierre-Guillaume Méon & Ariane Szafarz, 2011. "The Modern Corporation as a Safe Haven for Taste-Based Discrimination: An Agency Model of Hiring Decisions," ULB Institutional Repository 2013/88635, ULB -- Universite Libre de Bruxelles.
- repec:ese:iserwp:2010-33 is not listed on IDEAS
- Heywood, John S. & Parent, Daniel, 2009.
"Performance Pay and the White-Black Wage Gap,"
CLSSRN working papers
clsrn_admin-2009-42, Vancouver School of Economics, revised 22 Jul 2009.
- Hart, Robert A & Hubler, Olaf, 1991. "Are Profit Shares and Wages Substitute or Complementary Forms of Compensation?," Kyklos, Wiley Blackwell, vol. 44(2), pages 221-31.
- Lucian Arye Bebchuk & Jesse M. Fried & David I. Walker, 2002.
"Managerial Power and Rent Extraction in the Design of Executive Compensation,"
NBER Working Papers
9068, National Bureau of Economic Research, Inc.
- Bebchuk, Lucian Arye & Fried, Jesse & Walker, David I, 2002. "Managerial Power and Rent Extraction in the Design of Executive Compensation," CEPR Discussion Papers 3558, C.E.P.R. Discussion Papers.
- Bentley W. MacLeod, 2003.
"Optimal Contracting with Subjective Evaluation,"
American Economic Review,
American Economic Association, vol. 93(1), pages 216-240, March.
- Daniel Parent, 1999.
"Methods of pay and earnings: A longitudinal analysis,"
Industrial and Labor Relations Review,
ILR Review, Cornell University, ILR School, vol. 53(1), pages 71-86, October.
- Daniel Parent, 1997. "Methods of Pay and Earnings: A Longitudinal Analysis," CIRANO Working Papers 97s-14, CIRANO.
- Colin Green & John S. Heywood, 2008. "Does Performance Pay Increase Job Satisfaction?," Economica, London School of Economics and Political Science, vol. 75(300), pages 710-728, November.
- Marianne Bertrand & Sendhil Mullainathan, 2001. "Are Ceos Rewarded For Luck? The Ones Without Principals Are," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 901-932, August.
- Wadhwani, S. & Wall, M., 1988.
"The Effects Of Profit-Sharing On Employment, Wages, Stock Returns And Productivity: Evidence From Uk Micro-Data,"
311, London School of Economics - Centre for Labour Economics.
- Wadhwani, Sushil & Wall, Martin, 1990. "The Effects of Profit-Sharing on Employment, Wages, Stock Returns and Productivity: Evidence from UK Micro-data," Economic Journal, Royal Economic Society, vol. 100(399), pages 1-17, March.
- Konstantinos Pouliakas, 2010.
"Pay Enough, Don't Pay Too Much or Don't Pay at All? The Impact of Bonus Intensity on Job Satisfaction,"
Wiley Blackwell, vol. 63(4), pages 597-626, November.
- Pouliakas, Konstantinos, 2010. "Pay Enough, Don't Pay Too Much or Don't Pay at All? The Impact of Bonus Intensity on Job Satisfaction," IZA Discussion Papers 4713, Institute for the Study of Labor (IZA).
- Prendergast, Canice & Topel, Robert, 1993. "Discretion and bias in performance evaluation," European Economic Review, Elsevier, vol. 37(2-3), pages 355-365, April.
- Carmichael, H Lorne & MacLeod, W Bentley, 2000. "Worker Cooperation and the Ratchet Effect," Journal of Labor Economics, University of Chicago Press, vol. 18(1), pages 1-19, January.
- Charles Brown, 1990.
"Wage Levels and Method of Pay,"
NBER Working Papers
3336, National Bureau of Economic Research, Inc.
- Cornelissen, Thomas & Heywood, John S. & Jirjahn, Uwe, 2011.
"Performance pay, risk attitudes and job satisfaction,"
Elsevier, vol. 18(2), pages 229-239, April.
- Thomas Cornelißen & John S. Heywood & Uwe Jirjahn, 2008. "Performance Pay, Risk Attitudes and Job Satisfaction," SOEPpapers on Multidisciplinary Panel Data Research 136, DIW Berlin, The German Socio-Economic Panel (SOEP).
- Guido Friebel & Michael Raith, 2004. "Abuse of Authority and Hierarchical Communication," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 224-244, Summer.
- Roger T. Kaufman, 1998. "The Effects of Gain Sharing on the Basic Wage: The Case of IMPROSHARE," LABOUR, CEIS, vol. 12(3), pages 595-600, 09.
- Anna Zaharieva (Chizhova), 2010. "Risk Sharing and Employee Motivation in Competitive Search Equilibrium," Working Paper Series of the Department of Economics, University of Konstanz 2010-07, Department of Economics, University of Konstanz.
- Jenkins, Stephen P., 2010. "The British Household Panel Survey and its Income Data," IZA Discussion Papers 5242, Institute for the Study of Labor (IZA).
- Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October.
- Cahue, P. & Dormont, B., 1993. "Profit-Sharing: Does It Increase Productivity and Employment?," Papers 9307, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Evans).
If references are entirely missing, you can add them using this form.