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American Economic Review: Vol. 101 No. 2 (April 2011)

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Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender

Article Citation

Dohmen, Thomas, and Armin Falk. 2011. "Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender." American Economic Review, 101(2): 556-90.

DOI: 10.1257/aer.101.2.556

Abstract

This paper studies the impact of incentives on worker self-selection in a controlled laboratory experiment. Subjects face the choice between a fixed and a variable payment scheme. Depending on the treatment, the variable payment is a piece rate, a tournament, or a revenue-sharing scheme. We find that output is higher in the variable-payment schemes compared to the fixed-payment scheme. This difference is largely driven by productivity sorting. In addition, different incentive schemes systematically attract individuals with different attitudes, such as willingness to take risks and relative self-assessment as well as gender, which underlines the importance of multidimensional sorting. (JEL C91, D81, D82, J16, J31)

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Authors

Dohmen, Thomas (Maastricht U)
Falk, Armin (U Bonn)

JEL Classifications

C91: Design of Experiments: Laboratory, Individual
D81: Criteria for Decision-Making under Risk and Uncertainty
D82: Asymmetric and Private Information
J16: Economics of Gender; Non-labor Discrimination
J31: Wage Level and Structure; Wage Differentials


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