Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/80859
Authors: 
Bäker, Agnes
Mertins, Vanessa
Year of Publication: 
2012
Series/Report no.: 
IAAEU Discussion Paper Series in Economics 08/2012
Abstract: 
Incentive schemes not only influence the effort provision of workers, but might also induce sorting. As drivers of self-selection, the literature mainly focuses on measures of productivity; however, other variables, such as preferences, beliefs and personality, also play a role. With this paper, we contribute to the literature on drivers of self-selection by analyzing the role of perceived wage risks as potential influences on the sorting decision. To this end, we study a sorting decision between two variable compensation systems, where both options carry wage risks. Specifically, we look at sorting between individual piece rates and team piece rates. Using experimental data, we find evidence for both risk diversification considerations and free-riding concerns (i.e., risk of teaming-up with low-productive teammates) as drivers of self-selection. However, our data does not support the concern of our experimental subjects that others actually reduce their effort when working under team compensation, as compared to individual-based compensation.
Subjects: 
Sorting
Piece rates
Wage risk
Experiment
Free-riding
Risk diversification
JEL: 
M52
J33
C91
D81
Document Type: 
Working Paper

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