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Performance pay: trends and consequences introduction

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  • Bender, Keith A.
  • Bryson, Alex

Abstract

From First Principles, one of the key implications of standard labour economic theory is that workers should be paid their marginal product. Pay that is tied to a worker’s performance, therefore, would seem to provide the most direct link to satisfy this theoretical requirement (Lazear, 1986). Indeed, there is ample evidence that indicates that implementing pay for performance increases productivity through a combination of increased incentives for high productivity and incentives for highly productive workers to sort themselves into these types of jobs (e.g., Lazear, 2000; Haley, 2003; Gielen et al., 2010; Jones et al., 2010 and Bryson et al., 2013). Because of these potentially beneficial attributes of performance-related pay, much research has been devoted to identifying how widespread the pay practice is compared with other methods of compensation, how it has changed over time, how it is viewed by different labour market actors and whether it correlates (positively or negatively) with other labour market outcomes, as well as a host of other research questions.

Suggested Citation

  • Bender, Keith A. & Bryson, Alex, 2013. "Performance pay: trends and consequences introduction," LSE Research Online Documents on Economics 56968, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:56968
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    File URL: http://eprints.lse.ac.uk/56968/
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    References listed on IDEAS

    as
    1. K. Pouliakas & I. Theodossiou, 2009. "Confronting Objections To Performance Pay: The Impact Of Individual And Gain‐Sharing Incentives On Job Satisfaction," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(5), pages 662-684, November.
    2. Keith Bender & Colin Green & John Heywood, 2012. "Piece rates and workplace injury: Does survey evidence support Adam Smith?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 569-590, January.
    3. Alex Bryson & Richard Freeman & Claudio Lucifora & Michele Pellizzari & Virginie Perotin, 2012. "Paying for Performance: Incentive Pay Schemes and Employees' Financial Participation," CEP Discussion Papers dp1112, Centre for Economic Performance, LSE.
    4. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-431, July.
    5. M. Ryan Haley, 2003. "The Response of Worker Effort to Piece Rates: Evidence from the Midwest Logging Industry," Journal of Human Resources, University of Wisconsin Press, vol. 38(4).
    6. 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.
    7. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2009. "Confronting Objections to Performance Pay: A Study of the Impact of Individual and Gain-sharing Incentives on the Job Satisfaction of British Employees," MPRA Paper 14244, University Library of Munich, Germany.
    8. Keith A. Bender & Ioannis Theodossiou, 2014. "The unintended consequences of the rat race: the detrimental effects of performance pay on health," Oxford Economic Papers, Oxford University Press, vol. 66(3), pages 824-847.
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    More about this item

    JEL classification:

    • N0 - Economic History - - General
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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