Do Salaries Improve Worker Performance?

We establish the effects of salaries on worker performance by exploiting a natural experiment in which some workers in a particular occupation (football referees) switch from short-term contracts to salaried contracts. Worker performance improves among those who move onto salaried contracts relative to those who do not. The finding is robust to the introduction of worker fixed effects indicating that it is not driven by better workers being awarded salary contracts. Nor is it sensitive to workers sorting into or out of the profession. Improved performance could arise from the additional effort workers exert due to career concerns, the higher income associated with career contracts (an efficiency wage effect) or improvements in worker quality arising from off-the-job training which accompanies the salaried contracts.

Residual Income in Four Dimensions: Goal-Congruity, Controllability, Understandability and Practicability

The article discusses ten versions of residual income known in the literature from the point of view of four criteria that are of special importance if the measure is to be the basis of managerial bonuses: goal-congruity, controllability, understandability and practicability. There is – on average – a considerable trade-off between goal-congruity and the three remaining criteria. However, there are residual income versions – like net economic income (NEI) and the variant of residual income that is based exclusively on unadjusted book values (RIBV) – which demonstrate outstandingly favorable levels of goal-congruity, controllability, understandability and practicability. Although NEI exhibits the highest level of goal-congruity among the ten versions of residual income studied in the article and acceptable levels of three remaining features, it is deficient of intensive scientific examination which is necessary to make such a new tool the subject of justified recommendation. On the other hand, RIBV is the most controllable and seems to be the most understandable and the most practicable among the ten versions analyzed in the paper. However, its goal-congruity is relatively low. Yet, it can be improved without making the computational formula more complex simply by including some mechanisms making managers less myopic in bonus plan architecture.residual income (RI), net economic income (NEI), residual income that is based exclusively on unadjusted book values (RIBV), goal-congruity

Motivating knowledge agents : can incentive pay overcome social distance?

This paper studies the interaction of incentive pay and social distance in the dissemination of information. We analyse theoretically as well as empirically the e ect of incentive pay when agents have pro-social objectives, but also preferences over dealing with one social group relative to another. In a randomised eld experiment undertaken across 151 villages in South India, local agents were hired to spread information about a public health insurance programme. Relative to at pay, incentive pay improves knowledge transmission to households that are socially distant from the agent, but not to households similar to the agent