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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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Working Paper: Performance Pay, Sorting and Social Motivation (2008) Downloads
Working Paper: Performance Pay, Sorting and Social Motivation (2008) Downloads
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