High-Powered Performance Pay and Crowding out of Non-Monetary Motives

David Huffman and Michael Bognanno

No 11920, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: A previous literature cautions that paying workers for performance might crowd out non-monetary motives to work hard. Empirical evidence from the field, however, has been based on between-subjects designs that are best suited for detecting crowding out due to low-powered incentives. High-powered incentives in the workplace tend to increase output, but it is unknown whether this masks crowding out. This paper uses a within-subject experimental design and finds evidence that crowding out also extends to high-powered incentives, in a real work setting with paid workers. There is individual heterogeneity, however, with a minority of workers report crowding in of motivation. Thus, the impact of performance pay might depend on the mix of worker types.

Keywords: intrinsic motivation; incentives; non-cognitive skills; experiment (search for similar items in EconPapers)
JEL-codes: D03 J22 J33 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2018-10
New Economics Papers: this item is included in nep-exp, nep-hrm and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published - published in: Management Science, 2018, 64 (10), 4669-4680.

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Journal Article: High-Powered Performance Pay and Crowding Out of Nonmonetary Motives (2018)
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