Working Paper: NBER ID: w13128
Authors: Thomas Lemieux; W. Bentley Macleod; Daniel Parent
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: performance pay; wage inequality; labor market; US; wage dispersion
JEL Codes: J31; J33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| incidence of performance pay (J33) | wage inequality (J31) |
| incidence of performance pay (J33) | wage dispersion (J31) |
| performance pay jobs (J33) | sensitivity of wages to productivity (J39) |
| increase in incidence of performance pay (J33) | growth in wage variance among males (J31) |
| performance pay (J33) | wage inequality (J31) |