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Performance Pay Systems and the Gender Wage Gap

  • 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)

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.

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Paper provided by Motu Economic and Public Policy Research in its series Working Papers with number 12_13.

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Length: 34 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:mtu:wpaper:12_13
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  1. John S. Heywood & Uwe Jirjahn, 2002. "Payment schemes and gender in Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(1), pages 44-64, October.
  2. 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.
  3. 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.
  4. Wiji Arulampalam & Alison L. Booth & Mark L. Bryan, 2007. "Is There a Glass Ceiling over Europe? Exploring the Gender Pay Gap across the Wage Distribution," ILR Review, Cornell University, ILR School, vol. 60(2), pages 163-186, January.
  5. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers 90-07, Rochester, Business - Managerial Economics Research Center.
  6. 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).
  7. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
  8. Doris Weichselbaumer & Rudolf Winter-Ebmer, 2003. "A meta-analysis of the international gender wage gap," Economics working papers 2003-11, Department of Economics, Johannes Kepler University Linz, Austria.
  9. Robert Gibbons, 1998. "Incentives in Organizations," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 115-132, Fall.
  10. 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.
  11. 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.
  12. Daniel Parent & John S. Heywood, 2009. "Performance Pay And The White-Black Wage Gap," Departmental Working Papers 2009-07, McGill University, Department of Economics.
  13. Thomas Lemieux & W. Bentley MacLeod & Daniel Parent, 2009. "Performance Pay and Wage Inequality-super-," The Quarterly Journal of Economics, MIT Press, vol. 124(1), pages 1-49, February.
  14. 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.
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