Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316746 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 17791
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We use US longitudinal survey data to examine the role of performance pay (other than profit sharing) in worker quit decisions. We argue that performance pay should increasingly be viewed as an indicator of an internal labor market rather than of a simple contemporaneous incentive. Suggestive of this claim, we find that in ever more complete specifications that account for worker and employer characteristics, aggregate earnings and worker job satisfaction, performance pay is associated with a reduced probability of worker quits. This remains when including worker fixed effects that control for unmeasured invariant heterogeneity. We investigate how it varies with the type of performance pay and its intensity. We confirm heterogeneity in this influence by workplace size.
Subjects: 
performance pay
internal labor markets
voluntary quits
JEL: 
J33
J41
J63
Document Type: 
Working Paper

Files in This Item:
File
Size
689.09 kB





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