Advanced Search
MyIDEAS: Login to save this paper or follow this series

Performance Pay and the White-Black Wage Gap

Contents:

Author Info

  • Heywood, John S.
  • Parent, Daniel

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 this remains true even when examining suitable counterfactuals that hold observables constant between whites and blacks. We explore reasons behind our finding that performance pay is associated with greater racial earnings gaps at the top of the wage distribution focusing on the interactions between discrimination, unmeasured ability and selection.

Download Info

If 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.
File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no.%2034%20-%20Parent%20and%20Heywood.pdf
File Function: Main Text
Download Restriction: no

Bibliographic Info

Paper provided by Vancouver School of Economics in its series CLSSRN working papers with number clsrn_admin-2009-42.

as in new window
Length: 48 pages
Date of creation: 22 Jul 2009
Date of revision: 22 Jul 2009
Handle: RePEc:ubc:clssrn:clsrn_admin-2009-42

Contact details of provider:
Web page: http://www.clsrn.econ.ubc.ca/

Related research

Keywords: Racial Wage Differentials; Compensation Practices;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Thomas Lemieux & W. Bentley MacLeod & Daniel Parent, 2009. "Performance Pay and Wage Inequality-super-," The Quarterly Journal of Economics, MIT Press, vol. 124(1), pages 1-49, February.
  2. Robert Gibbons & Lawrence F. Katz & Thomas Lemieux & Daniel Parent, 2002. "Comparative Advantage, Learning, and Sectoral Wage Determination," CIRANO Working Papers 2002s-35, CIRANO.
  3. Grytten, Jostein & Sorensen, Rune, 2003. "Practice variation and physician-specific effects," Journal of Health Economics, Elsevier, vol. 22(3), pages 403-418, May.
  4. Uwe Jirjahn & Gesine Stephan, 2004. "Gender, piece rates and wages: evidence from matched employer--employee data," Cambridge Journal of Economics, Oxford University Press, vol. 28(5), pages 683-704, September.
  5. Banker, Rajiv D. & Lee, S.-Y.Seok-Young & Potter, Gordon & Srinivasan, Dhinu, 2000. "An empirical analysis of continuing improvements following the implementation of a performance-based compensation plan," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 315-350, December.
  6. David Card & Thomas Lemieux, 1993. "Wage Dispersion, Returns to Skill, and Black-White Wage Differentials," Working Papers 691, Princeton University, Department of Economics, Industrial Relations Section..
  7. Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October.
  8. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
  9. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-44, September.
  10. Sergio Firpo & Nicole M. Fortin & Thomas Lemieux, 2007. "Unconditional Quantile Regressions," NBER Technical Working Papers 0339, National Bureau of Economic Research, Inc.
  11. Dohmen, Thomas & Falk, Armin, 2011. "Performance Pay and Multidimensional Sorting - Productivity, Preferences and Gender," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 360, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  12. Charles Brown, 1981. "Black-White Earnings Ratios Since the Civil Rights Act of 1964: The Importance of Labor Market Dropouts," NBER Working Papers 0617, National Bureau of Economic Research, Inc.
  13. Harry J. Holzer & Keith R. Ihlanfeldt, 1998. "Customer Discrimination And Employment Outcomes For Minority Workers," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 835-867, August.
  14. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
  15. Bentley W. MacLeod, 2003. "Optimal Contracting with Subjective Evaluation," American Economic Review, American Economic Association, vol. 93(1), pages 216-240, March.
  16. Derek Neal, 2004. "The Measured Black-White Wage Gap among Women Is Too Small," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S1-S28, February.
  17. Card, David & Lemieux, Thomas, 1994. "Changing Wage Structure and Black-White Wage Differentials," American Economic Review, American Economic Association, vol. 84(2), pages 29-33, May.
  18. Robert Barsky & John Bound & Kerwin Charles & Joseph Lupton, 2001. "Accounting for the Black-White Wealth Gap: A Nonparametric Approach," NBER Working Papers 8466, National Bureau of Economic Research, Inc.
  19. Michelle Brown & John S. Heywood, 2005. "Performance Appraisal Systems: Determinants and Change," British Journal of Industrial Relations, London School of Economics, vol. 43(4), pages 659-679, December.
  20. John S. Heywood & Patrick L. O’Halloran, 2005. "Racial Earnings Differentials and Performance Pay," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
  21. A. E. Fernández Jilberto, 1991. "Introduction," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 21(1), pages 3-9, April.
  22. Barth, Erling & Bratsberg, Bernt & Haegeland, Torbjørn & Raaum, Oddbjørn, 2009. "Performance Pay and Within-Firm Wage Inequality," IZA Discussion Papers 4137, Institute for the Study of Labor (IZA).
  23. Thomas Lemieux & W. Bentley MacLeod & Daniel Parent, 2007. "Performance Pay and Wage Inequality," NBER Working Papers 13128, National Bureau of Economic Research, Inc.
  24. Derek A. Neal & William R. Johnson, 1995. "The Role of Pre-Market Factors in Black-White Wage Differences," NBER Working Papers 5124, National Bureau of Economic Research, Inc.
  25. Brown, James N & Light, Audrey, 1992. "Interpreting Panel Data on Job Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 219-57, July.
  26. Elaine Reardon, 1997. "Demand-Side Changes and the Relative Economic Progress of Black Men: 1940-90," Journal of Human Resources, University of Wisconsin Press, vol. 32(1), pages 69-97.
  27. Kevin Lang, 2007. "Introduction to Poverty and Discrimination
    [Poverty and Discrimination]
    ," Introductory Chapters, Princeton University Press.
  28. Heywood, John S., 1989. "Wage discrimination by race and gender in the public and private sectors," Economics Letters, Elsevier, vol. 29(1), pages 99-102.
  29. John Bound & Richard B. Freeman, 1991. "What Went Wrong? The Erosion of Relative Earnings and Employment Among Young Black Men in the 1980s," NBER Working Papers 3778, National Bureau of Economic Research, Inc.
  30. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  31. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
  32. George J. Borjas, 2002. "The Wage Structure and the Sorting of Workers into the Public Sector," NBER Working Papers 9313, National Bureau of Economic Research, Inc.
  33. Curme, Michael & Stefanec, Noah, 2007. "Worker quality and labor market sorting," Economics Letters, Elsevier, vol. 96(2), pages 202-208, August.
  34. Glenn MacDonald & Leslie M. Marx, 2001. "Adverse Specialization," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 864-899, August.
  35. D. Alton Smith, 1980. "Government Employment and Black/White Relative Wages," Journal of Human Resources, University of Wisconsin Press, vol. 15(1), pages 77-86.
  36. Kenneth Couch, 2002. "Black-White Wage Inequality in the 1990s: a Decade of Progress," Economic Inquiry, Western Economic Association International, vol. 40(1), pages 31-41, January.
  37. Keith A. Bender, 2003. "Examining Equality between Public- and Private-Sector Wage Distributions," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 62-79, January.
  38. Dan Black & Amelia Haviland & Seth Sanders & Lowell Taylor, 2006. "Why Do Minority Men Earn Less? A Study of Wage Differentials among the Highly Educated," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 300-313, May.
  39. Kahn, Lawrence M, 1991. "Customer Discrimination and Affirmative Action," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 555-71, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ghazala Azmat & Rosa Ferrer, 2013. "Gender Gaps in Performance: Evidence from Young Lawyers," Working Papers 604, Barcelona Graduate School of Economics.
  2. Maury Gittleman, & Brooks Pierce,, 2013. "Pay for Performance and Compensation Inequality: Evidence from the ECEC," Working Papers 465, U.S. Bureau of Labor Statistics.
  3. 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.
  4. 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.
  5. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, Elsevier.
  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. Merlino, Luca Paolo, 2012. "Discrimination, technology and unemployment," Labour Economics, Elsevier, vol. 19(4), pages 557-567.
  8. 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.
  9. 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.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ubc:clssrn:clsrn_admin-2009-42. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vivian Tran).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.