Do Firms Pay Bonuses to Protect Jobs?
No 2015_6, CEU Working Papers from Department of Economics, Central European University
A large share of workers receives bonus payments besides their base wage. The benefits of flexible wage components in renumeration are twofolded: they can incentivize workers and make it easier to adjust wages downward in response to negative shocks. Using data on bonus payments of Hungarian workers from linked employer-employee data, I disentangle the importance of these two factors to assess their respective importance. First, I show that bonus payments flexibly adjust to the revenue shocks of firms. At the same time, the separation rate of workers without bonuses do not react more to revenue changes than the separation rate of workers with bonuses. Bonus paying firms are shown to be financially more stable, larger and more productive, and they have less volatile revenue than firms not paying bonuses. These facts are consistent with a wage posting model with incentive contracting, but they are hard to reconcile with models emphasizing the role of bonus payments in alleviating wage rigidity. These results indicate that wage flexibility regulations may not affect the employment responses of firms to negative shocks.
New Economics Papers: this item is included in nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
http://www.personal.ceu.hu/staff/repec/pdf/2015_6.pdf Full text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ceu:econwp:2015_6
Access Statistics for this paper
More papers in CEU Working Papers from Department of Economics, Central European University Contact information at EDIRC.
Series data maintained by Anita Apor ().