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Performance-related pay and gender wage differences

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  • Kangasniemi, Mari
  • Kauhanen, Antti

Abstract

We study the impact of performance-related pay (PRP) on gender wage differences using Finnish linked employer-employee panel data. Controlling for unobserved person and firm effects, we find that bonuses increase women’s earnings slightly less than men’s, but the economic significance of the difference is negligible. Piece rates and reward rates, however, tend to increase gender wage differentials. Thus, the nature of a performance related pay plan is important for gauging the impact of PRP on gender wage differentials. A comparison with OLS results shows the importance of controlling for unobserved person and firm effects.

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Bibliographic Info

Paper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 1249.

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Length: 27 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:rif:dpaper:1249

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Keywords: gender wage differences; performance-related pay; person and firm effects; panel data;

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  1. de la Rica, Sara & Dolado, Juan J. & Vegas, Raquel, 2010. "Performance Pay and the Gender Wage Gap: Evidence from Spain," CEPR Discussion Papers 7936, C.E.P.R. Discussion Papers.
  2. Amuedo-Dorantes Catalina & De la Rica Sara, 2006. "The Role of Segregation and Pay Structure on the Gender Wage Gap: Evidence from Matched Employer-Employee Data for Spain," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-34, April.
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