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Pay enough, don’t pay too much or don’t pay at all? An empirical study of the non-monotonic impact of incentives on job satisfaction

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  • Pouliakas, Konstantinos

Abstract

This paper attempts to test the non-monotonic effect of monetary incentives on job satisfaction. Specifically, 8 waves (1998-2005) of the British Household Panel Survey (BHPS) are used to investigate the ceteris paribus association between the intensity of bonus/profit-sharing payments and the utility derived from work. After controlling for individual heterogeneity biases, it is shown that relatively ‘small’ bonuses exert a significant negative effect on worker satisfaction. In contrast, job utility is found to rise only in response to ‘large’ bonus payments, primarily in skilled, non-unionized private sector jobs. The empirical evidence of the paper is therefore consistent with a ‘V-effect’ of incentives, suggesting that employers wishing to motivate their staff should indeed “pay enough or don’t pay at all”.

Suggested Citation

  • Pouliakas, Konstantinos, 2008. "Pay enough, don’t pay too much or don’t pay at all? An empirical study of the non-monotonic impact of incentives on job satisfaction," MPRA Paper 10031, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:10031
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    File URL: https://mpra.ub.uni-muenchen.de/20155/2/MPRA_paper_20155.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Incentives; intensity; job satisfaction; non-monotonic;

    JEL classification:

    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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