IDEAS home Printed from https://ideas.repec.org/p/zbw/glodps/47.html
   My bibliography  Save this paper

Performance Pay and Applicant Screening

Author

Listed:
  • Jirjahn, Uwe
  • Mohrenweiser, Jens

Abstract

Using German establishment data, we show that the relationship between intensity of performance pay and intensity of applicant screening depends on the nature of production. In establishments with increased multitasking, performance pay is positively associated with applicant screening. By contrast, in establishments without increased multitasking, performance pay is negatively associated with applicant screening. The findings fit the hypothesis that performance pay induces a positive self-sorting of employees if jobs are less multifaceted. In this case, employers with a high intensity of performance pay do not need intensive applicant screening to ensure a high quality of matches between workers and jobs. However, if jobs are more multifaceted, performance pay can entail problems of adverse self-sorting. In order to mitigate or overcome these problems, employers making intensive use of performance pay also screen applicants more intensively.

Suggested Citation

  • Jirjahn, Uwe & Mohrenweiser, Jens, 2017. "Performance Pay and Applicant Screening," GLO Discussion Paper Series 47, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:47
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/156405/1/GLO_DP_0047.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rachel Griffith & Andrew Neely, 2009. "Performance Pay and Managerial Experience in Multitask Teams: Evidence from within a Firm," Journal of Labor Economics, University of Chicago Press, vol. 27(1), pages 49-82, January.
    2. Roland Bénabou & Jean Tirole, 2016. "Bonus Culture: Competitive Pay, Screening, and Multitasking," Journal of Political Economy, University of Chicago Press, vol. 124(2), pages 305-370.
    3. Zwick, Thomas, 2011. "Seniority wages and establishment characteristics," Labour Economics, Elsevier, vol. 18(6), pages 853-861.
    4. Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988. " Compensation and Incentives: Practice vs. Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 593-616, July.
    5. Keith Bender & Colin Green & John Heywood, 2012. "Piece rates and workplace injury: Does survey evidence support Adam Smith?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 569-590, January.
    6. Keld Laursen & Nicolai J. Foss, 2003. "New human resource management practices, complementarities and the impact on innovation performance," Cambridge Journal of Economics, Oxford University Press, vol. 27(2), pages 243-263, March.
    7. Itoh, Hideshi, 1994. "Job design, delegation and cooperation: A principal-agent analysis," European Economic Review, Elsevier, vol. 38(3-4), pages 691-700, April.
    8. Benjamin Artz & John S. Heywood, 2015. "Performance Pay and Workplace Injury: Panel Evidence," Economica, London School of Economics and Political Science, vol. 82, pages 1241-1260, December.
    9. Thomas Cornelissen & John Heywood & Uwe Jirjahn, 2014. "Reciprocity and Profit Sharing: Is There an Inverse U-shaped Relationship?," Journal of Labor Research, Springer, vol. 35(2), pages 205-225, June.
    10. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    11. George Baker & Michael Gibbs & Bengt Holmstrom, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 921-955.
    12. ., 1994. "Firm, Boundaries of the," Chapters, in: Geoffrey M. Hodgson & Warren J. Samuels & Marc R. Tool (ed.), The Elgar Companion to Institutional and Evolutionary Economics, volume 0, chapter 43, Edward Elgar Publishing.
    13. Thomas Dohmen & Armin Falk, 2011. "Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender," American Economic Review, American Economic Association, vol. 101(2), pages 556-590, April.
    14. Fali Huang & Peter Cappelli, 2010. "Applicant Screening and Performance-Related Outcomes," American Economic Review, American Economic Association, vol. 100(2), pages 214-218, May.
    15. Grund, Christian & Sliwka, Dirk, 2010. "Evidence on performance pay and risk aversion," Economics Letters, Elsevier, vol. 106(1), pages 8-11, January.
    16. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 339-376.
    17. Barron, John M & Gjerde, Kathy Paulson, 1997. "Peer Pressure in an Agency Relationship," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 234-254, April.
    18. Patrick Kampkötter & Dirk Sliwka, 2016. "The Complementary Use of Experiments and Field Data to Evaluate Management Practices: The Case of Subjective Performance Evaluations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(2), pages 364-389, June.
    19. Heywood, John S. & Siebert, W. Stanley & Wei, Xiangdong, 2013. "The Consequences of a Piece Rate on Quantity and Quality: Evidence from a Field Experiment," IZA Discussion Papers 7660, Institute of Labor Economics (IZA).
    20. Jan Erik Askildsen & Uwe Jirjahn & Stephan C. Smith, 2002. "Works Councils and Environmental Investment: Theory and Evidence from German Panel Data," CESifo Working Paper Series 785, CESifo.
    21. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    22. Heywood, John S. & Jirjahn, Uwe & Struewing, Cornelia, 2017. "Locus of control and performance appraisal," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 205-225.
    23. ., 1994. "Firm, Theoru of the (I)," Chapters, in: Geoffrey M. Hodgson & Warren J. Samuels & Marc R. Tool (ed.), The Elgar Companion to Institutional and Evolutionary Economics, volume 0, chapter 44, Edward Elgar Publishing.
    24. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-431, July.
    25. Jed Devaro, 2005. "Employer Recruitment Strategies and the Labor Market Outcomes of New Hires," Economic Inquiry, Western Economic Association International, vol. 43(2), pages 263-282, April.
    26. Uwe Jirjahn & Erik Poutsma, 2013. "The Use of Performance Appraisal Systems: Evidence from Dutch Establishment Data," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 52(4), pages 801-828, October.
    27. Christopher Winship & Larry Radbill, 1994. "Sampling Weights and Regression Analysis," Sociological Methods & Research, , vol. 23(2), pages 230-257, November.
    28. Thomas Hellmann & Veikko Thiele, 2011. "Incentives and Innovation: A Multitasking Approach," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 78-128, February.
    29. repec:dau:papers:123456789/10093 is not listed on IDEAS
    30. Drago, Robert & Garvey, Gerald T, 1998. "Incentives for Helping on the Job: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 1-25, January.
    31. George Baker, 2002. "Distortion and Risk in Optimal Incentive Contracts," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 728-751.
    32. Heywood, John S. & Jirjahn, Uwe, 2009. "Profit sharing and firm size: The role of team production," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 246-258, August.
    33. anonymous, 1994. "Research confirms rationality of analysts' forecasts," Economics Update, Federal Reserve Bank of Atlanta, issue Apr, pages 1-2.
    34. Laffont, Jean-Jacques, 1990. "Analysis of Hidden Gaming in a Three-Level Hierarchy," Journal of Law, Economics, and Organization, Oxford University Press, vol. 6(2), pages 301-324, Fall.
    35. Lindbeck, Assar & Snower, Dennis J, 2000. "Multitask Learning and the Reorganization of Work: From Tayloristic to Holistic Organization," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 353-376, July.
    36. Patrick Kampkötter & Jens Mohrenweiser & Dirk Sliwka & Susanne Steffes & Stefanie Wolter, 2016. "Measuring the use of human resources practices and employee attitudes: The Linked Personnel Panel," Evidence-based HRM: A Global Forum for Empirical Scholarship, Emerald Group Publishing, vol. 4(2), pages 94-115, August.
    37. Askildsen, Jan Erik & Jirjahn, Uwe & Smith, Stephen C., 2006. "Works councils and environmental investment: Theory and evidence from German panel data," Journal of Economic Behavior & Organization, Elsevier, vol. 60(3), pages 346-372, July.
    38. Hodaka Morita, 2005. "Multi-skilling, Delegation and Continuous Process Improvement: A Comparative Analysis of US-Japanese Work Organizations," Economica, London School of Economics and Political Science, vol. 72(285), pages 69-93, February.
    39. Richard B. Freeman & Joseph R. Blasi & Douglas L. Kruse, 2010. "Introduction to "Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options"," NBER Chapters, in: Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options, pages 1-37, National Bureau of Economic Research, Inc.
    40. 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.
    41. John Heywood & Uwe Jirjahn & Georgi Tsertsvardze, 2010. "Hiring older workers and employing older workers: German evidence," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 595-615, March.
    42. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
    43. Keith A. Bender & Ioannis Theodossiou, 2014. "The unintended consequences of the rat race: the detrimental effects of performance pay on health," Oxford Economic Papers, Oxford University Press, vol. 66(3), pages 824-847.
    44. Eve Caroli & John Van Reenen, 2001. "Skill-Biased Organizational Change? Evidence from A Panel of British and French Establishments," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1449-1492.
    45. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-991, September.
    46. Curme, Michael & Stefanec, Noah, 2007. "Worker quality and labor market sorting," Economics Letters, Elsevier, vol. 96(2), pages 202-208, August.
    47. David H. Autor & David Scarborough, 2008. "Does Job Testing Harm Minority Workers? Evidence from Retail Establishments," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 219-277.
    48. Carpenter, Jeffrey & Bowles, Samuel & Gintis, Herbert & Hwang, Sung-Ha, 2009. "Strong reciprocity and team production: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 221-232, August.
    49. Prendergast, Canice & Topel, Robert, 1993. "Discretion and bias in performance evaluation," European Economic Review, Elsevier, vol. 37(2-3), pages 355-365, April.
    50. ., 1994. "Firm, Theoru of the (II)," Chapters, in: Geoffrey M. Hodgson & Warren J. Samuels & Marc R. Tool (ed.), The Elgar Companion to Institutional and Evolutionary Economics, volume 0, chapter 45, Edward Elgar Publishing.
    51. Douglas L. Kruse & Richard B. Freeman & Joseph R. Blasi, 2010. "Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options," NBER Books, National Bureau of Economic Research, Inc, number krus08-1, May.
    52. Uwe Jirjahn & Kornelius Kraft, 2011. "Do Spillovers Stimulate Incremental or Drastic Product Innovations? Evidence from German Establishment Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(4), pages 509-538, August.
    53. Michelle Brown & John S. Heywood, 2005. "Performance Appraisal Systems: Determinants and Change," British Journal of Industrial Relations, London School of Economics, vol. 43(4), pages 659-679, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Baktash, Mehrzad B. & Heywood, John S. & Jirjahn, Uwe, 2021. "Performance Pay and Alcohol Use in Germany," GLO Discussion Paper Series 800, Global Labor Organization (GLO).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Uwe Jirjahn & Erik Poutsma, 2013. "The Use of Performance Appraisal Systems: Evidence from Dutch Establishment Data," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 52(4), pages 801-828, October.
    2. John S. Heywood & Uwe Jirjahn, 2014. "Variable Pay, Industrial Relations and Foreign Ownership: Evidence from Germany," British Journal of Industrial Relations, London School of Economics, vol. 52(3), pages 521-552, September.
    3. Uwe Jirjahn, 2018. "The adoption and termination of profit sharing for employees: does management’s attitude play a role?," Applied Economics, Taylor & Francis Journals, vol. 50(2), pages 108-127, January.
    4. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    5. Thomas Cornelissen & John S. Heywood & Uwe Jirjahn, 2010. "Profit Sharing and Reciprocity: Theory and Survey Evidence," SOEPpapers on Multidisciplinary Panel Data Research 292, DIW Berlin, The German Socio-Economic Panel (SOEP).
    6. Heywood, John S. & Jirjahn, Uwe & Struewing, Cornelia, 2017. "Locus of control and performance appraisal," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 205-225.
    7. Alberto Bayo-Moriones & Jose E. Galdon-Sanchez & Sara Martinez-de-Morentin, 2017. "Performance Measurement and Incentive Intensity," Journal of Labor Research, Springer, vol. 38(4), pages 496-546, December.
    8. Uwe Jirjahn, 2016. "Works Councils and Employer Attitudes toward the Incentive Effects of HRM Practices," Research Papers in Economics 2016-07, University of Trier, Department of Economics.
    9. Brickley, James A, 1999. "Incentive Conflicts and Contractual Restraints: Evidence from Franchising," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 745-774, October.
    10. Thomas Cornelissen & John Heywood & Uwe Jirjahn, 2014. "Reciprocity and Profit Sharing: Is There an Inverse U-shaped Relationship?," Journal of Labor Research, Springer, vol. 35(2), pages 205-225, June.
    11. Edward P. Lazear, 1995. "Personnel Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121883, February.
    12. Bouwens, J.F.M.G. & van Lent, L.A.G.M., 2003. "Effort and Selection Effects of Incentive Contracts," Discussion Paper 2003-130, Tilburg University, Center for Economic Research.
    13. Michael Waldman, 2012. "Theory and Evidence in Internal Labor Markets," Introductory Chapters, in: Robert Gibbons & John Roberts (ed.),The Handbook of Organizational Economics, Princeton University Press.
    14. Amirah El-Haddad, 2013. "Political Patronage and Economic Opportunity: The Case of Vertical Integration in the Egyptian Clothing Industry," Working Papers 797, Economic Research Forum, revised Nov 2013.
    15. Bengt Holmström, 2017. "Pay for Performance and Beyond," American Economic Review, American Economic Association, vol. 107(7), pages 1753-1777, July.
    16. Brent Boning & Casey Ichniowski & Kathryn Shaw, 2007. "Opportunity Counts: Teams and the Effectiveness of Production Incentives," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 613-650.
    17. Edward P. Lazear & Paul Oyer, 2012. "Personnel Economics," Introductory Chapters, in: Robert Gibbons & John Roberts (ed.),The Handbook of Organizational Economics, Princeton University Press.
    18. Román, Francisco J., 2009. "An analysis of changes to a team-based incentive plan and its effects on productivity, product quality, and absenteeism," Accounting, Organizations and Society, Elsevier, vol. 34(5), pages 589-618, July.
    19. Brice Corgnet & Roberto Hernán-González & Stephen Rassenti, 2011. "Real Effort, Real Leisure and Real-time Supervision: Incentives and Peer Pressure in Virtual Organizations," Working Papers 11-05, Chapman University, Economic Science Institute.
    20. Guadalupe, Maria & Wulf, Julie, 2009. "The Flattening Firm and Product Market Competition," CEPR Discussion Papers 7253, C.E.P.R. Discussion Papers.
    21. Bouwens, J.F.M.G. & van Lent, L.A.G.M., 2003. "Effort and Selection Effects of Incentive Contracts," Other publications TiSEM 46a62de7-d051-4620-93bb-3, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

    Performance pay; multitasking; self-sorting; applicant screening; non-managerial employees; managerial employees;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:glodps:47. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/glabode.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/glabode.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.