Performance pay, risk attitudes and job satisfaction

Thomas Cornelissen (), John Heywood and Uwe Jirjahn

Labour Economics, 2011, vol. 18, issue 2, 229-239

Abstract: We present a model in which workers with greater ability and greater risk tolerance move into performance pay jobs to capture rents and contrast it with the classic agency model. Estimates from the German Socio-Economic Panel confirm testable implications drawn from our model. First, before controlling for earnings, workers in performance pay jobs have higher job satisfaction, a proxy for on-the-job utility. Second, after controlling for earnings, workers in jobs with performance pay have the same job satisfaction 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 models in which workers capture rent, 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)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

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Working Paper: Performance Pay, Risk Attitudes and Job Satisfaction (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:18:y:2011:i:2:p:229-239

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