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Performance Pay Systems and the Gender Wage Gap

Author

Listed:
  • Richard Fabling

    () (Motu Economic and Public Policy Research)

  • Arthur Grimes

    () (Motu Economic and Public Policy Research and University of Auckland)

  • David C. Maré

    () (Motu Economic and Public Policy Research)

Abstract

We examine the relationship between performance pay systems and wages, paying particular attention to gender differences in outcomes. At the firm level, estimates suggest average wages are unaffected by changes in performance pay practices, but that the within-firm distribution of wages is stretched. This latter result is explained by worker-level regressions, showing that male workers with initially higher expected wages are more likely to benefit from increased use of performance pay in the firm. Given the apparent absence of such an effect on female wages and the concentration of prime-age men in the top quartile of the wage distribution, women, on average, benefit less from the operation of performance pay systems.

Suggested Citation

  • Richard Fabling & Arthur Grimes & David C. Maré, 2012. "Performance Pay Systems and the Gender Wage Gap," Working Papers 12_13, Motu Economic and Public Policy Research.
  • Handle: RePEc:mtu:wpaper:12_13
    as

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    File URL: http://motu-www.motu.org.nz/wpapers/12_13.pdf
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    References listed on IDEAS

    as
    1. Thomas Lemieux & W. Bentley MacLeod & Daniel Parent, 2009. "Performance Pay and Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 124(1), pages 1-49.
    2. John S. Heywood & Daniel Parent, 2012. "Performance Pay and the White-Black Wage Gap," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 249-290.
    3. Doris Weichselbaumer & Rudolf Winter-Ebmer, 2005. "A Meta-Analysis of the International Gender Wage Gap," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 479-511, July.
    4. Richard Fabling & Arthur Grimes, 2009. "The "suite" smell of success: complementary personnel practices and firm performance," Reserve Bank of New Zealand Discussion Paper Series DP2009/13, Reserve Bank of New Zealand.
    5. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
    6. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 91-114, Fall.
    7. Richard Fabling, 2009. "A Rough Guide to New Zealand's Longitudinal Business Database," Global COE Hi-Stat Discussion Paper Series gd09-103, Institute of Economic Research, Hitotsubashi University.
    8. Robert Gibbons, 1998. "Incentives in Organizations," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 115-132, Fall.
    9. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-817, August.
    10. Datta Gupta, Nabanita & Eriksson, Tor, 2006. "New Workplace Practices and the Gender Wage Gap: Can the New Economy be the Great Equalizer?," IZA Discussion Papers 2038, Institute for the Study of Labor (IZA).
    11. Richard Fabling, 2011. "Keeping it Together: Tracking Firms on New Zealand’s Longitudinal Business Database," Working Papers 11_01, Motu Economic and Public Policy Research.
    12. Fidan Ana Kurtulus & Donald Tomaskovic-Devey, 2011. "Do Women Top Managers Help Women Advance? A Panel Study Using EEO-1 Records," UMASS Amherst Economics Working Papers 2011-14, University of Massachusetts Amherst, Department of Economics.
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    More about this item

    Keywords

    human resource management; personnel economics; gender wage gap; performance pay;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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