The inability to measure the opportunity cost of labor has plagued analyses of firm-level compensation policies for many years. Using a newly constructed data set of French workers and firms, we estimate the opportunity cost of the employees' time based on a measure of the person-effect in the...

An effective performance-based compensation system must increase the probability of high performance corporate outcomes in order to justify the incremental expense relative to a straight salary system. A positive relation between current performance and current compensation indicates that the...