Performance Pay, Risk Attitudes and Job Satisfaction

Thomas Cornelissen (), John Heywood and Uwe Jirjahn

No 136, SOEPpapers on Multidisciplinary Panel Data Research from DIW Berlin, The German Socio-Economic Panel (SOEP)

Abstract: We present a sorting model in which workers with greater ability and greater risk tolerance move into performance pay jobs and contrast it with the classic agency model of performance pay. Estimates from the German Socio-Economic Panel confirm testable implications drawn from our sorting model. First, prior to controlling for earnings, workers in performance pay jobs have higher job satisfaction, a proxy for on-the-job utility. Second, after controlling for the higher earnings associated with performance pay, the job satisfaction of those in performance pay jobs is the same as those not in such jobs. Third, those workers in performance pay jobs who have greater risk tolerance routinely report greater job satisfaction. While these findings support the sorting model, they would not be suggested by the classic agency model.

Keywords: Performance Pay; Worker Heterogeneity; Ability; Risk Preferences; Sorting (search for similar items in EconPapers)
JEL-codes: D80 J24 J28 J33 M52 (search for similar items in EconPapers)
Pages: 39 p.
Date: 2008
New Economics Papers: this item is included in nep-bec, nep-hap and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Performance pay, risk attitudes and job satisfaction (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwsop:diw_sp136

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