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Performance Pay and Prior Learning: Evidence from a Retail Chain

Kathrin Manthei (), Dirk Sliwka and Timo Vogelsang ()
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Kathrin Manthei: RFH Koeln

No 11859, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We run two field experiments within a large retail chain showing that the effectiveness of performance pay crucially hinges on prior job experience. Introducing sales-based performance pay for district- and later for store-managers, we find negligible average treatment effects. Based on surveys and interviews, we develop a formal model demonstrating that the effect of performance pay decreases with experience and may even vanish in the limit. We provide empirical evidence in line with this hypothesis, for instance, finding positive treatment effects (only) in stores with low job experience.

Keywords: performance pay; incentives; learning; experience; insider econometrics; field experiment; randomized control trial (RCT) (search for similar items in EconPapers)
JEL-codes: J33 M52 C93 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-exp, nep-hrm and nep-lma
Date: 2018-09
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