Incentive pay: Productivity, sorting, and adjacent rents

Noah Patrick Stefanec

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2010, vol. 39, issue 2, 171-179

Abstract: I model and empirically test the hypothesis that higher-quality workers prefer performance pay to time-rate based pay because they realize rent upon two different dimensions: Explicit and implicit rents. First, higher-quality workers are outright more productive than their lower-quality counterparts, earning them explicit rent (Curme and Stefanec, 2007). Second, these same factors of production facilitate the unobserved heterogeneity for incentive workers, earning them implicit rent because they can produce a given level of output with less effort. I find strong empirical evidence to confirm that these implicit rents exist and I measure them at 1.5-3.4 percent of average real hourly earnings.

Keywords: Incentive; pay; Rent; Incentive-altering; preferences (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:39:y:2010:i:2:p:171-179

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