Working Paper: CEPR ID: DP17010
Authors: Guido Friebel; Miriam Krueger
Abstract: In a professional services firm, top management unexpectedly adjusted the pay of consultants in somedivisions to the pay in other divisions. In this quasi-experiment, fixed wages increased and bonusesdecreased, reducing pay for the high and increasing it for the low performers. Individual outputs andefforts decreased by 30%, and attrition and absenteeism increased. The effects are driven by those whowere rationally expecting to lose from the pay change. Observing a period of more than three years, weshow long-term negative reciprocity of those affected, but no negative selection effects of new hires.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pay change (J33) | decrease in individual outputs and efforts (D29) |
| pay change (J33) | increased attrition (D29) |
| pay change (J33) | increased absenteeism (J22) |
| decrease in individual outputs and efforts (D29) | negative reciprocity (Z13) |
| pay change (J33) | long-term reductions in performance (D29) |
| new hires (M51) | productivity compared to those replaced (O49) |