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Firms' Choice of Method of Pay

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  • Charles Brown

Abstract

Using data from the BLS Industry Wage Survey, the author tests the theory that firms choose their methods of pay by balancing the gains from more precise links between performance and pay against monitoring costs. The results confirm most of the predictions from the general theory. For example, large firms make significantly greater use of standard-rate pay than do small firms, and incentive pay (such as piece rates) is less likely in jobs with a variety of duties than in jobs with a narrow set of routines.

Suggested Citation

  • Charles Brown, 1990. "Firms' Choice of Method of Pay," ILR Review, Cornell University, ILR School, vol. 43(3), pages 165-1-182-, April.
  • Handle: RePEc:sae:ilrrev:v:43:y:1990:i:3:p:165-s-182-s
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    1. Barron, John M & Loewenstein, Mark A, 1986. "On Imperfect Evaluation and Earning Differentials," Economic Inquiry, Western Economic Association International, vol. 24(4), pages 595-614, October.
    2. Dennis J. Aigner & Glen G. Cain, 1977. "Statistical Theories of Discrimination in Labor Markets," ILR Review, Cornell University, ILR School, vol. 30(2), pages 175-187, January.
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