Do Employers Pay for Consistent Performance?: Evidence from the NBA

Economic Inquiry, Vol. 36, No. 1, January 1998

Posted: 8 Jul 1998

See all articles by Orn B. Bodvarsson

Orn B. Bodvarsson

Saint Cloud State University; IZA Institute of Labor Economics

Raymond T. Brastow

Longwood College

Abstract

In a world of uncertainty in which a worker's performance is variable over time and average performance is unknown when hiring, how will employers determine compensation? We develop a monitoring and signaling model where information is symmetric and parties are risk neutral. Monitoring costs increase with inconsistency, lowering pay for inconsistent workers. If discrimination exists, minority workers will be rewarded less than majority workers for improving consistency. Testing these and other predictions using National Basketball Association data, we find that consistent professional basketball players are paid more, but, in contrast to previous studies, there is no evidence of discrimination.

JEL Classification: J3, J7

Suggested Citation

Bodvarsson, Orn B. and Brastow, Raymond T., Do Employers Pay for Consistent Performance?: Evidence from the NBA. Economic Inquiry, Vol. 36, No. 1, January 1998, Available at SSRN: https://ssrn.com/abstract=105528

Orn B. Bodvarsson (Contact Author)

Saint Cloud State University ( email )

Saint Cloud, MN 56301
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Raymond T. Brastow

Longwood College ( email )

School of Business and Economics
Farmville, VA
United States
804-395-2370 (Phone)
804-395-2203 (Fax)

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