Variable pay creates a link between pay and performance but may also help firms in attracting more productive employees. Our experiment investigates the impact of performance pay on both incentives and sorting and analyzes the influence of repeated interactions between firms and employees on...

We apply agency theory to the payroll records of a copper mine that paid a production bonus to teams of workers. As with most incentive pay used by firms, the bonus was simpler in form than the optimal contract that balances incentives, insurance, and free-riding. We explore whether transactions...

Earlier studies of the impact of performance pay on individuals’ behavior have primarily been concerned with the effects on their earnings and productivity. The productivity increases associated with the adoption of performance pay practices may, however, come at the expense of quality of life...

We show that women in the NLSY79 and NLSY97 are less likely than men to receive competitive compensation. The portion of the gender wage gap explained by compensation schemes is small in the NLSY79 but somewhat larger in the NLSY97.