Pay, Productivity and Management

36 Pages Posted: 18 Oct 2021 Last revised: 9 Apr 2022

See all articles by Nicholas Bloom

Nicholas Bloom

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Scott Ohlmacher

U.S. Census Bureau - Center for Economic Studies

Cristina Tello-Trillo

Government of the United States of America - Bureau of the Census; Yale University, Department of Economics, Students

Melanie Wallskog

Economics Department, Stanford University

Date Written: October 2021

Abstract

Using confidential Census matched employer-employee earnings data we find that employees at more productive firms, and firms with more structured management practices, have substantially higher pay, both on average and across every percentile of the pay distribution. This pay-performance relationship is particularly strong amongst higher paid employees, with a doubling of firm productivity associated with 11% more pay for the highest-paid employee (likely the CEO) compared to 4.7% for the median worker. This pay-performance link holds in public and private firms, although it is almost twice as strong in public firms for the highest-paid employees. Top pay volatility is also strongly related to productivity and structured management, suggesting this performance-pay relationship arises from more aggressive monitoring and incentive practices for top earners.

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Suggested Citation

Bloom, Nicholas and Ohlmacher, Scott and Tello-Trillo, Cristina and Wallskog, Melanie, Pay, Productivity and Management (October 2021). NBER Working Paper No. w29377, Available at SSRN: https://ssrn.com/abstract=3944425

Nicholas Bloom (Contact Author)

Stanford University - Department of Economics ( email )

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HOME PAGE: http://economics.stanford.edu/faculty/bloom

National Bureau of Economic Research (NBER) ( email )

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Scott Ohlmacher

U.S. Census Bureau - Center for Economic Studies ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

Cristina Tello-Trillo

Government of the United States of America - Bureau of the Census ( email )

4600 Silver Hill Road
Washington, DC 20233-9100
United States

Yale University, Department of Economics, Students

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Melanie Wallskog

Economics Department, Stanford University ( email )

Stanford, CA 94305
United States

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