47 Pages Posted: 27 Jun 2007
Date Written: May 2007
We document that an increasing fraction of jobs in the U.S. labor market explicitly pay workers for their performance using bonuses, commissions, or piece-rates. We find that compensation in performance-pay jobs is more closely tied to both observed (by the econometrician) and unobserved productive characteristics of workers. Moreover, the growing incidence of performance-pay can explain 24 percent of the growth in the variance of male wages between the late 1970s and the early 1990s, and accounts for nearly all of the top-end growth in wage dispersion(above the 80th percentile).
Suggested Citation: Suggested Citation
Lemieux, Thomas and MacLeod, W. Bentley and Parent, Daniel, Performance Pay and Wage Inequality (May 2007). NBER Working Paper No. w13128. Available at SSRN: https://ssrn.com/abstract=988938