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Performance Pay and the White-Black Wage Gap

  • John S. Heywood
  • Daniel Parent

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 that this remains true even when examining suitable counterfactuals that hold observables constant between whites and blacks. We explore reasons behind our finding focusing on the interactions between discrimination, unmeasured ability, and selection.

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File URL: http://www.jstor.org/stable/full/10.1086/663355
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 30 (2012)
Issue (Month): 2 ()
Pages: 249 - 290

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Handle: RePEc:ucp:jlabec:doi:10.1086/663355
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