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Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender

  • Thomas Dohmen
  • Armin Falk

This paper studies the impact of incentives on worker self-selection in a controlled laboratory experiment. Subjects face the choice between a fixed and a variable payment scheme. Depending on the treatment, the variable payment is a piece rate, a tournament, or a revenue-sharing scheme. We find that output is higher in the variable-payment schemes compared to the fixed-payment scheme. This difference is largely driven by productivity sorting. In addition, different incentive schemes systematically attract individuals with different attitudes, such as willingness to take risks and relative self-assessment as well as gender, which underlines the importance of multidimensional sorting. (JEL C91, D81, D82, J16, J31)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 101 (2011)
Issue (Month): 2 (April)
Pages: 556-90

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Handle: RePEc:aea:aecrev:v:101:y:2011:i:2:p:556-90
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