Performance-pay, sorting and social motivation

Tor Eriksson and Marie Claire Villeval

Journal of Economic Behavior & Organization, 2008, vol. 68, issue 2, 412-421

Abstract: Variable pay links pay and performance but may also help firms to attract more productive employees. Our experiment investigates the impact of performance-pay on both incentives and sorting and analyzes the influence of repeated interactions between firms and employees on these effects. We show that (i) the opportunity to switch from a fixed wage to variable pay scheme increases the average effort level and its variance, and (ii) high skill employees concentrate under the variable pay scheme; (iii) however, in repeated interactions, efficiency wages reduce the attraction of performance-pay. Social motivation and reputation influence both the provision of incentives and their sorting effect.

Keywords: Performance-pay; Incentives; Sorting; Social; motivation; Experiment (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (43)

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Related works:
Working Paper: Performance Pay, Sorting and Social Motivation (2008)
Working Paper: Performance Pay, Sorting and Social Motivation (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:68:y:2008:i:2:p:412-421

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