Implementing performance pay requires that workers' output be measured. When measurement costs differ among firms, those with a measurement cost advantage choose to implement performance pay. They attract the best workers, and both the level and variability of compensation are higher at these...

This paper examines the relationship between firms’ wage offers and workers’ supply of effort using a three-period experiment. In equilibrium, firms will offer deferred compensation: first period productivity is positive and wages are zero, while third period productivity is zero and wages...

This paper examines the effects of performance pay on earnings using linked employeeemployer panel data from Finland. These payroll data contain information on the exact share of earnings obtained and hours worked on a performance pay contract. Using these data, we estimate the effects of...