Performance Pay and Prior Learning: Evidence from a Retail Chain

49 Pages Posted: 8 Oct 2018

See all articles by Kathrin Manthei

Kathrin Manthei

University of Cologne

Dirk Sliwka

University of Cologne - Department of Business Administration and Human Resource Management; IZA Institute of Labor Economics

Timo Vogelsang

University of Cologne - Faculty of Management, Economics and Social Sciences

Abstract

We run two field experiments within a large retail chain showing that the effectiveness of performance pay crucially hinges on prior job experience. Introducing sales-based performance pay for district- and later for store-managers, we find negligible average treatment effects. Based on surveys and interviews, we develop a formal model demonstrating that the effect of performance pay decreases with experience and may even vanish in the limit. We provide empirical evidence in line with this hypothesis, for instance, finding positive treatment effects (only) in stores with low job experience.

Keywords: performance pay, incentives, learning, experience, insider econometrics, field experiment, randomized control trial (RCT)

JEL Classification: J33, M52, C93

Suggested Citation

Manthei, Kathrin and Sliwka, Dirk and Vogelsang, Timo, Performance Pay and Prior Learning: Evidence from a Retail Chain. IZA Discussion Paper No. 11859. Available at SSRN: https://ssrn.com/abstract=3261718

Kathrin Manthei (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Dirk Sliwka

University of Cologne - Department of Business Administration and Human Resource Management ( email )

Koln, 50923
Germany

IZA Institute of Labor Economics

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

Timo Vogelsang

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Richard-Strauss-Str. 2
Cologne, D-50923
Germany

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