Performance Pay and Wage Inequality

Thomas Lemieux, W. Bentley Macleod () and Daniel Parent ()

No 2850, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We document that an increasing fraction of jobs in the U.S. labor market explicitly pay workers for their performance using bonuses, commissions, or piece-rates. We find that compensation in performance-pay jobs is more closely tied to both observed (by the econometrician) and unobserved productive characteristics of workers. Moreover, the growing incidence of performance-pay can explain 24 percent of the growth in the variance of male wages between the late 1970s and the early 1990s, and accounts for nearly all of the top-end growth in wage dispersion (above the 80th percentile).

Keywords: incentive pay; bonus pay; performance pay; compensation; wage inequality (search for similar items in EconPapers)
JEL-codes: J31 J33 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2007-06
New Economics Papers: this item is included in nep-bec and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

Published - published in: Quarterly Journal of Economics, 2009, 124 (1), 1-49

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Related works:
Journal Article: Performance Pay and Wage Inequality (2009)
Working Paper: Performance Pay and Wage Inequality (2007)
Working Paper: PERFORMANCE PAY AND WAGE INEQUALITY (2006)
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