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Performance Pay and Prior Learning: Evidence from a Retail Chain

Author

Listed:
  • Manthei, Kathrin

    () (University of Cologne)

  • Sliwka, Dirk

    () (University of Cologne)

  • Vogelsang, Timo

    () (University of Cologne)

Abstract

We run two field experiments within a large retail chain showing that the effectiveness of performance pay crucially hinges on prior job experience. Introducing sales-based performance pay for district- and later for store-managers, we find negligible average treatment effects. Based on surveys and interviews, we develop a formal model demonstrating that the effect of performance pay decreases with experience and may even vanish in the limit. We provide empirical evidence in line with this hypothesis, for instance, finding positive treatment effects (only) in stores with low job experience.

Suggested Citation

  • Manthei, Kathrin & Sliwka, Dirk & Vogelsang, Timo, 2018. "Performance Pay and Prior Learning: Evidence from a Retail Chain," IZA Discussion Papers 11859, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11859
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    Keywords

    performance pay; incentives; learning; experience; insider econometrics; field experiment; randomized control trial (RCT);

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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