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Performance Pay, Sorting and Social Motivation

Listed author(s):
  • Tor Eriksson

    ()

    (Department of economics)

  • Marie Claire Villeval

    ()

    (GATE - Groupe d'analyse et de théorie économique - UL2 - Université Lumière - Lyon 2 - Ecole Normale Supérieure Lettres et Sciences Humaines - CNRS - Centre National de la Recherche Scientifique)

Variable pay links pay and performance but may also help firms in attracting more productive employees. Our experiment investigates the impact of performance pay on both incentives and sorting and analyzes the influence of repeated interactions between firms and employees on these effects. We show that (i) the opportunity to switch from a fixed wage to variable pay scheme increases the average effort level and its variance; (ii) high skill employees concentrate under the variable pay scheme; (iii) however, in repeated interactions, efficiency wages reduce the attraction of performance pay. Social motivation and reputation influence both the provision of incentives and their sorting effect.

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File URL: https://halshs.archives-ouvertes.fr/halshs-00331753/document
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Paper provided by HAL in its series Post-Print with number halshs-00331753.

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Date of creation: 2008
Publication status: Published in Journal of Economic Behavior and Organization, Elsevier, 2008, 68 (2), pp. 412-421. 〈10.1016/j.jebo.2007.10.003〉
Handle: RePEc:hal:journl:halshs-00331753
DOI: 10.1016/j.jebo.2007.10.003
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00331753
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  18. Harry J. Paarsch & Bruce S. Shearer, 1999. "The Response of Worker Effort to Piece Rates: Evidence from the British Columbia Tree-Planting Industry," Journal of Human Resources, University of Wisconsin Press, vol. 34(4), pages 643-667.
  19. Booth, Alison L & Frank, Jeff, 1999. "Earnings, Productivity, and Performance-Related Pay," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 447-463, July.
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  22. Dickinson, David & Villeval, Marie-Claire, 2008. "Does monitoring decrease work effort?: The complementarity between agency and crowding-out theories," Games and Economic Behavior, Elsevier, vol. 63(1), pages 56-76, May.
  23. Simon G�chter & Ernst Fehr, "undated". "Fairness in the Labour Market � A Survey of Experimental Results," IEW - Working Papers 114, Institute for Empirical Research in Economics - University of Zurich.
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