Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/58862 
Year of Publication: 
2011
Series/Report no.: 
IZA Discussion Papers No. 6070
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
It is often claimed that supervisors do not differentiate enough between high and low performing employees when evaluating performance. The purpose of this paper is to study the incentive effects of this behavior empirically. We first show in a simple model that the perceived degree of past differentiation affects future incentives. We then study the impact of differentiation empirically with a large panel data set spanning many firms in one industry. On average, stronger differentiation has a substantial positive effect on performance. This effect is larger on higher hierarchical levels. But differentiation may become harmful at the lowest levels.
Subjects: 
bonus payments
differentiation
subjective performance evaluation
incentives
JEL: 
M52
D23
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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