Cookies?
Library Header Image
LSE Research Online LSE Library Services

Incentives for managers and inequality among workers: evidence from a firm level experiment

Bandiera, Oriana, Barankay, Iwan and Rasul, Imran (2006) Incentives for managers and inequality among workers: evidence from a firm level experiment. 5649. Centre for Economic Policy Research, London, UK.

Full text not available from this repository.

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.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.cepr.org
Additional Information: © 2006 Oriana Bandiera, Iwan Barankay and Imran Rasul
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages; Payment Methods
M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics > M52 - Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs, seniority issues)
Sets: Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 5649
Date Deposited: 28 Feb 2008
URL: http://eprints.lse.ac.uk/3553/

Actions (login required)

Record administration - authorised staff only Record administration - authorised staff only