Performance Pay, Risk Attitudes and Job Satisfaction

Arbeitspapier

We present a sorting model in which workers with greater ability and greater risk tolerance move into performance pay jobs and contrast it with the classic agency model of performance pay. Estimates from the German Socio-Economic Panel confirm testable implications drawn from our sorting model. First, prior to controlling for earnings, workers in performance pay jobs have higher job satisfaction, a proxy for on-the-job utility. Second, after controlling for the higher earnings associated with performance pay, the job satisfaction of those in performance pay jobs is the same as those not in such jobs. Third, those workers in performance pay jobs who have greater risk tolerance routinely report greater job satisfaction. While these findings support the sorting model, they would not be suggested by the classic agency model.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SOEPpapers on Multidisciplinary Panel Data Research ; No. 136

Classification and Topics

• Classification: Wirtschaft ; Information, Knowledge, and Uncertainty: General ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Safety; Job Satisfaction; Related Public Policy ; Compensation Packages; Payment Methods ; Personnel Economics: Compensation and Compensation Methods and Their Effects
• Subject: Performance Pay ; Worker Heterogeneity ; Ability ; Risk Preferences ; Sorting

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cornelißen, Thomas ; Heywood, John S. ; Jirjahn, Uwe
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/150684
• Last update: 10.03.2025, 11:42 AM CET