Risk-sorting and preference for team piece rates

Agnes Baeker () and Vanessa Mertins
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Agnes Baeker: Institute for Labour Law and Industrial Relations in the EU, University of Trier

No 201208, IAAEU Discussion Papers from Institute of Labour Law and Industrial Relations in the European Union (IAAEU)

Abstract: Incentive schemes not only influence the effort provision of workers, but might also induce sorting. As drivers of self-selection, the literature mainly focuses on measures of productivity; however, other variables, such as preferences, beliefs and personality, also play a role. With this paper, we contribute to the literature on drivers of self-selection by analyzing the role of perceived wage risks as potential influences on the sorting decision. To this end, we study a sorting decision between two variable compensation systems, where both options carry wage risks. Specifically, we look at sorting between individual piece rates and team piece rates. Using experimental data, we find evidence for both risk diversification considerations and free-riding concerns (i.e., risk of teaming-up with low-productive teammates) as drivers of self-selection. However, our data does not support the concern of our experimental subjects that others actually reduce their effort when working under team compensation, as compared to individual-based compensation.

Keywords: Risk perception; Sorting; Preferred rewards; Productivity (search for similar items in EconPapers)
JEL-codes: C91 D81 J33 M52 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-hrm, nep-lma and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Risk-sorting and preference for team piece rates (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:iaa:dpaper:201208

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