Believe Me, You are (Not) that Bad

CentER Discussion Paper Series No. 2016-032

34 Pages Posted: 2 Sep 2016

See all articles by Victor Gonzalez

Victor Gonzalez

Tilburg University - Tilburg University School of Economics and Management

Date Written: August 29, 2016

Abstract

This paper studies the effect of incentive schemes incorporating status classes on workers’ performance. I focus on performance comparisons between similarly skilled workers that belong to different status classes. A theoretical framework predicts that, under certain conditions, low ability workers attain high performance when they are assigned to a high rather than a low status class, and that high ability workers achieve high performance irrespective of the received status. These predictions are tested in a laboratory setting, where subjects are randomly assigned to a high status or a low status condition and constant performance feedback is provided. The experimental data support both predictions: low ability subjects assigned to the high status condition outperform their low status counterparts by 0.53 standard deviations in a cognitively challenging task, and high ability subjects display high performance outcomes in both status classes. Moreover, I explore the subjects’ beliefs about performance as a mechanism to explain these results. I find that low ability subjects assigned to the high status exhibit performance targets that were as high as those elicited by high ability participants. This suggests that these workers used status to believe that they were good performers, and performed accordingly.

Keywords: Performance, Status, Beliefs, Experiments, Cognition

JEL Classification: D03, C91, D84, M54, Z13

Suggested Citation

Gonzalez, Victor, Believe Me, You are (Not) that Bad (August 29, 2016). CentER Discussion Paper Series No. 2016-032, Available at SSRN: https://ssrn.com/abstract=2833205 or http://dx.doi.org/10.2139/ssrn.2833205

Victor Gonzalez (Contact Author)

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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