Workplace Productivity and Bonus Preferences: Why Do Men with Low Productivity Prefer Individual Pay?

18 Pages Posted: 6 Jun 2017

See all articles by Gaute Torsvik

Gaute Torsvik

University of Bergen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: July 2017

Abstract

This paper examines the relationship between workers' productivity and preferred bonus scheme. The data are from a company where agents work in teams and receive a bonus that depends on individual and team performance. Standard agency theory predicts that workers with productivity below the team average prefer a team bonus, while high‐productivity agents prefer an individual bonus. Risk aversion may temper the taste for individual pay. This model predicts the observed relationship between productivity and bonus preferences very well. There is, however, one pattern that it cannot explain: many low performers—especially men—prefer individual bonuses.

Suggested Citation

Torsvik, Gaute, Workplace Productivity and Bonus Preferences: Why Do Men with Low Productivity Prefer Individual Pay? (July 2017). Economica, Vol. 84, Issue 335, pp. 498-515, 2017. Available at SSRN: https://ssrn.com/abstract=2981362 or http://dx.doi.org/10.1111/ecca.12188

Gaute Torsvik (Contact Author)

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway
55589225 (Phone)
55589210 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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