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Performance Pay And The White-Black Wage Gap

  • Daniel Parent

    ()

  • John S. Heywood

    ()

We show that the reported tendency for performance pay to be associated with greater wage inequality at the top of the earnings distribution applies only to white workers. This results in the white-black wage differential among those in performance pay jobs growing over the earnings distribution even as the same differential shrinks over the distribution for those not in performance pay jobs. We show this remains true even when examining suitable counterfactuals that hold observables constant between whites and blacks. We explore reasons behind our finding that performance pay is associated with greater racial earnings gaps at the top of the wage distribution focusing on the interactions between discrimination, unmeasured ability and selection.

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File URL: http://www.mcgill.ca/files/economics/HP_black_white_v7_jan2009.pdf
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Paper provided by McGill University, Department of Economics in its series Departmental Working Papers with number 2009-07.

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Length: 45 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:mcl:mclwop:2009-07
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