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Research Paper University of Aberdeen Business School: Centre for European Labour Market Research Discussion Paper 2007-06

Some are punished and some are rewarded: a study of the impact of performance pay on job satisfaction

Authors

Publication date

2007

Abstract

Using an econometric procedure that corrects for both self-selection of individuals into their preferred compensation scheme and wage endogeneity, this study investigates whether significant differences exist in the job satisfaction of individuals receiving performance-related pay (PRP) compared to those on alternative compensation plans. Using data from four waves of the British Household Panel Survey (BHPS), it is found that PRP exerts a positive effect on the mean job satisfaction of (very) high-paid workers only. A potential explanation for this pattern could be that for lower-paid employees PRP is perceived to be controlling, whereas higher-paid workers derive a utility benefit from what they regard as supportive reward schemes. Using PRP as an incentive device in the UK could therefore be counterproductive in the long run for certain low-paid occupations.

Subjects

Labour Market, Wages And Earnings, and Well Being

Links

http://auraserv.abdn.ac.uk:9080/aura/handle/2164/108

Notes

discussion paper

#509083


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