Does Performance Pay Increase Job Satisfaction?

19 Pages Posted: 8 Oct 2008

See all articles by Colin P. Green

Colin P. Green

Department of Economics

John S. Heywood

University of Wisconsin at Milwaukee

Date Written: 2007-03-29

Abstract

This paper investigates the influence of performance-related pay on several dimensions of job satisfaction. In cross-sectional estimates performance-related pay is associated with increased overall satisfaction, satisfaction with pay, satisfaction with job security and satisfaction with hours. It appears to be negatively associated with satisfaction with the work itself; yet, after accounting for worker fixed effects the positive associations remain and the negative association vanishes. These results appear robust to a variety of alternative specifications and support the notion that performance-related pay allows increased opportunities for worker optimization and does not generally demotivate workers or crowd out intrinsic motivation.

Suggested Citation

Green, Colin P. and Heywood, John S., Does Performance Pay Increase Job Satisfaction? (2007-03-29). Economica, Vol. 75, Issue 300, pp. 710-728, November 2008, Available at SSRN: https://ssrn.com/abstract=1280401 or http://dx.doi.org/10.1111/j.1468-0335.2007.00649.x

Colin P. Green

Department of Economics ( email )

Høgskoleringen
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John S. Heywood

University of Wisconsin at Milwaukee ( email )

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