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The impact of performance pay on sales and fundraising

Listed author(s):
  • Maurice J.G. Bun
  • Leo Huberts

    (University of Amsterdam)

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.

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File URL: http://ase.uva.nl/binaries/content/assets/subsites/amsterdam-school-of-economics/research/uva-econometrics/dp-2016/1601.pdf
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Paper provided by Universiteit van Amsterdam, Dept. of Econometrics in its series UvA-Econometrics Working Papers with number 16-01.

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Date of creation: 14 Jan 2016
Handle: RePEc:ame:wpaper:1601
Contact details of provider: Postal:
Dept. of Econometrics, Universiteit van Amsterdam, Valckenierstraat 65, NL - 1018 XE Amsterdam, The Netherlands

Web page: http://www.ase.uva.nl/uva-econometrics
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  1. Origo, Federica, 2009. "Flexible pay, firm performance and the role of unions. New evidence from Italy," Labour Economics, Elsevier, vol. 16(1), pages 64-78, January.
  2. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
  3. Anne Gielen & Marcel Kerkhofs & Jan Ours, 2010. "How performance related pay affects productivity and employment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(1), pages 291-301, January.
  4. Uri Gneezy & Aldo Rustichini, 2000. "Pay Enough or Don't Pay at All," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 791-810.
  5. Frey, Bruno S & Oberholzer-Gee, Felix, 1997. "The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out," American Economic Review, American Economic Association, vol. 87(4), pages 746-755, September.
  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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