Performance Pay or Redistribution? Cultural Differences in Just-World Beliefs and Preferences for Wage Inequality

45 Pages Posted: 4 Feb 2015

See all articles by Douglas H. Frank

Douglas H. Frank

The Catholic University of America

Klaus Wertenbroch

INSEAD - Marketing

William Maddux

INSEAD - Organisational Behavior

Date Written: February 3, 2015

Abstract

We identify and test a specific psychological mechanism underlying cross-national differences in preferences for performance-based versus redistributive compensation systems. We posit that individuals’ beliefs in the inherent justness and deservedness of individual outcomes (i.e., just world beliefs: JWBs) can help explain individual and culture-level variation in preferences for these compensation systems. Study 1 demonstrates a general correlation between the JWBs of a culturally diverse sample of former managers and their preferences for performance versus equal pay for an individual task. Study 2 shows that American participants exhibit stronger preferences for individual performance pay versus redistributive pay than do French participants, a difference that is mediated by JWBs. Study 3 holds national culture constant and replicates these effects by experimentally manipulating JWBs, demonstrating the causal nature of JWBs in determining preferences for performance-based versus redistributive compensation systems. Implications for organizational incentive systems, culture, and work motivation are discussed.

Keywords: Culture, Compensation Systems, Incentives, Income Inequality, Just-World Beliefs

Suggested Citation

Frank, Douglas H. and Wertenbroch, Klaus and Maddux, William, Performance Pay or Redistribution? Cultural Differences in Just-World Beliefs and Preferences for Wage Inequality (February 3, 2015). INSEAD Working Paper No. 2015/10/MKT/OBH/ACGRE. Available at SSRN: https://ssrn.com/abstract=2559613 or http://dx.doi.org/10.2139/ssrn.2559613

Douglas H. Frank

The Catholic University of America

Washington, DC 20064
United States

Klaus Wertenbroch (Contact Author)

INSEAD - Marketing ( email )

Boulevard de Constance
Fontainebleau, 77305
France
(33)(1)6071-2651 (Phone)
(33)(1)6074-6197 (Fax)

William Maddux

INSEAD - Organisational Behavior ( email )

Finance area, Boulevard de Constance
Fontainebleau 77305
France

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