EconStor >
Forschungsinstitut zur Zukunft der Arbeit (IZA), Bonn >
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA) >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/33403
  
Title:Incentives for managers and inequality among workers: evidence from a firm level experiment PDF Logo
Authors:Bandiera, Oriana
Barankay, Iwan
Rasul, Imran
Issue Date:2006
Series/Report no.:IZA Discussion Papers 2062
Abstract:We present evidence from a firm level experiment in which we engineered an exogenous change in managerial compensation from fixed wages to performance pay based on the average productivity of lower-tier workers. Theory suggests that managerial incentives affect both the mean and dispersion of workers' productivity through two channels. First, managers respond to incentives by targeting their efforts towards more able workers, implying that both the mean and the dispersion increase. Second, managers select out the least able workers, implying that the mean increases but the dispersion may decrease. In our field experiment we find that the introduction of managerial performance pay raises both the mean and dispersion of worker productivity. Analysis of individual level productivity data shows that managers target their effort towards high ability workers, and the least able workers are less likely to be selected into employment. These results highlight the interplay between the provision of managerial incentives and earnings inequality among lower-tier workers.
Subjects:managerial incentives
targeting
selection
earnings inequality
JEL:J33
M52
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

Files in This Item:
File Description SizeFormat
510380387.pdf745.45 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/33403

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.