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Incentive Pay in the United States: Its Determinants and Its Effects

  • Daniel Parent

The0501n objective of this article is to provide a survey of the empirical work done on the use of incentive pay in the United States focusing on two0501n empirical questions: what are the determinants of their use and what are the effects of pay-per-performance schemes, if any. Theoretical models are also discussed so as to provide a background to the reported evidence. L'objectif poursuivi dans cet article est de faire un survol des travaux empiriques effectués relativement à l'utilisation des méthodes de rémunération incitative aux États-Unis. Deux questions font l'objet d'une attention particulière: quels sont les facteurs expliquant l'utilisation de ces méthodes de rémunération et quels en sont les effets réellement incitatifs. Les principaux modèles théoriques sous-jacents sont également discutés afin de fournir une toile de fond.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2001s-04.

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Length: 61 pages
Date of creation: 01 Jan 2001
Date of revision:
Handle: RePEc:cir:cirwor:2001s-04
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  1. Daniel Parent, 1997. "Methods of Pay and Earnings: A Longitudinal Analysis," CIRANO Working Papers 97s-14, CIRANO.
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  6. Lorne Carmichael, 1981. "Firm-Specific Human Capital and Promotion Ladders," Working Papers 452, Queen's University, Department of Economics.
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  10. Charles Brown, 1990. "Firms' choice of method of pay," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 165-182, February.
  11. W. Bentley MacLeod & Daniel Parent, 1999. "Job characteristics, wages, and the employment contract," Review, Federal Reserve Bank of St. Louis, issue May, pages 13-27.
  12. Kenneth J. McLaughlin, 1999. "Are nominal wage changes skewed away from wage cuts?," Review, Federal Reserve Bank of St. Louis, issue May, pages 117-132.
  13. Susan Athey & Scott Stern, 1998. "An Empirical Framework for Testing Theories About Complimentarity in Organizational Design," NBER Working Papers 6600, National Bureau of Economic Research, Inc.
  14. Claudia Goldin, 1985. "Monitoring Costs and Occupational Segregation by Sex: An Historical Analysis," NBER Working Papers 1560, National Bureau of Economic Research, Inc.
  15. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  16. Charles Brown, 1990. "Wage Levels and Method of Pay," NBER Working Papers 3336, National Bureau of Economic Research, Inc.
  17. Parent, Daniel, 2000. "Industry-Specific Capital and the Wage Profile: Evidence from the National Longitudinal Survey of Youth and the Panel Study of Income Dynamics," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 306-23, April.
  18. Douglas L. Kruse, 1993. "Profit Sharing: Does It Make a Difference?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ps, March.
  19. Robert Gibbons, 1986. "Piece-Rate Incentive Schemes," Working papers 424, Massachusetts Institute of Technology (MIT), Department of Economics.
  20. Carmichael, H Lorne, 1989. "Self-Enforcing Contracts, Shirking, and Life Cycle Incentives," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 65-83, Fall.
  21. Ewing, Bradley T., 1996. "Wages and performance-based pay: Evidence from the NLSY," Economics Letters, Elsevier, vol. 51(2), pages 241-246, May.
  22. Rajesh K. Aggarwal & Andrew A. Samwick, 1999. "The Other Side of the Trade-off: The Impact of Risk on Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 65-105, February.
  23. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier.
  24. Jacob Mincer & Boyan Jovanovic, 1981. "Labor Mobility and Wages," NBER Chapters, in: Studies in Labor Markets, pages 21-64 National Bureau of Economic Research, Inc.
  25. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-31, July.
  26. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
  27. Mellow, Wesley & Sider, Hal, 1983. "Accuracy of Response in Labor Market Surveys: Evidence and Implications," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 331-44, October.
  28. Macleod, W.B. & Kenemoto, Y., 1990. "The Ratchet Effect and the Market for Second-Hand Workers," Cahiers de recherche 9027, Universite de Montreal, Departement de sciences economiques.
  29. Erica L. Groshen & Alan B. Krueger, 1989. "The structure of supervision and pay in hospitals," Working Paper 8907, Federal Reserve Bank of Cleveland.
  30. George Baker & Robert Gibbons & Kevin J. Murphy, 1993. "Subjective Performance Measures in Optimal Incentive Contracts," NBER Working Papers 4480, National Bureau of Economic Research, Inc.
  31. Hausman, J. A. & Abrevaya, Jason & Scott-Morton, F. M., 1998. "Misclassification of the dependent variable in a discrete-response setting," Journal of Econometrics, Elsevier, vol. 87(2), pages 239-269, September.
  32. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
  33. Edward P. Lazear, 1996. "Performance Pay and Productivity," NBER Working Papers 5672, National Bureau of Economic Research, Inc.
  34. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  35. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  36. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  37. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
  38. Bull, Clive, 1987. "The Existence of Self-Enforcing Implicit Contracts," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 147-59, February.
  39. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 2001. "Reciprocity as a Contract Enforcement Device," Levine's Working Paper Archive 563824000000000143, David K. Levine.
  40. Neal, Derek, 1993. "Supervision and Wages across Industries," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 409-17, August.
  41. repec:eme:rlepps:v:18:y:1999:i:1999:p:177-242 is not listed on IDEAS
  42. Kruse, Douglas L, 1992. "Profit Sharing and Productivity: Microeconomic Evidence from the United States," Economic Journal, Royal Economic Society, vol. 102(410), pages 24-36, January.
  43. W. Bentley MacLeod & Daniel Parent, 1998. "Job Characteristics and the Form of Compensation," CIRANO Working Papers 98s-08, CIRANO.
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