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The impact of performance pay on sales and fundraising

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  • Maurice J.G. Bun
  • Leo Huberts

    (University of Amsterdam)

Abstract

In recent years there has been wide criticism of bonuses and performance pay in different forms. This can often be traced back to the recent financial crisis. Empirical evidence on the effects of bonuses and performance related pay is increasing. We contribute to the discussion by analyzing the impact of changes in the payment structure of a large Dutch marketing company. Specifically, we investigate the consequences for company sales of higher fixed pay in combination with lower bonuses. Exploiting shift level data of individual workers we find that average productivity decreases when the pay structure shifts more to fixed pay. Further analysis shows that this is a pure incentive effect and not due to sorting.

Suggested Citation

  • Maurice J.G. Bun & Leo Huberts, 2016. "The impact of performance pay on sales and fundraising," UvA-Econometrics Working Papers 16-01, Universiteit van Amsterdam, Dept. of Econometrics.
  • Handle: RePEc:ame:wpaper:1601
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    References listed on IDEAS

    as
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    6. Robert G. Chambers & John Quiggin, 2005. "Incentives and Standards in Agency Contracts," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(2), pages 201-228, May.
    7. Agnès Festré & Pierre Garrouste, 2015. "Theory And Evidence In Psychology And Economics About Motivation Crowding Out: A Possible Convergence?," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 339-356, April.
    8. Kunz, Alexis H. & Pfaff, Dieter, 2002. "Agency theory, performance evaluation, and the hypothetical construct of intrinsic motivation," Accounting, Organizations and Society, Elsevier, vol. 27(3), pages 275-295, April.
    9. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
    10. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-431, July.
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