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Performance-related pay and gender wage differences

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  • Mari Kangasniemi
  • Antti Kauhanen

Abstract

We study the impact of performance-related pay (PRP) on gender wage differences using Finnish-linked employer--employee panel data. Controlling for unobserved person and firm effects, we find that bonuses increase women's earnings slightly less than men's, but the economic significance of the difference is negligible. Piece rates and reward rates, however, tend to increase gender wage differentials. Thus, the nature of a PRP plan is important for gauging the impact of PRP on gender wage differentials. A comparison with OLS results shows the importance of controlling for an unobserved person and firm effects.

Suggested Citation

  • Mari Kangasniemi & Antti Kauhanen, 2013. "Performance-related pay and gender wage differences," Applied Economics, Taylor & Francis Journals, vol. 45(36), pages 5131-5143, December.
    • Handle: RePEc:taf:applec:v:45:y:2013:i:36:p:5131-5143
    DOI: 10.1080/00036846.2013.824546
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    References listed on IDEAS

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    1. Daniel Parent, 2001. "Incentive Pay in the United States: Its Determinants and Its Effects," CIRANO Working Papers 2001s-04, CIRANO.
    2. de la Rica, Sara & Dolado, Juan J. & Vegas, Raquel, 2010. "Performance Pay and the Gender Wage Gap: Evidence from Spain," IZA Discussion Papers 5032, Institute of Labor Economics (IZA).
    3. Eva M. Meyersson Milgrom & Trond Petersen & Vemund Snartland, 2001. "Equal Pay for Equal Work? Evidence from Sweden and a Comparison with Norway and the U.S," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 559-583, December.
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    5. Wolf, Elke & Heinze, Anja, 2007. "How to Limit Discrimination? Analyzing the Effects of Innovative Workplace Practices on Intra-Firm Gender Wage Gaps Using Linked Employer-Employee Data," ZEW Discussion Papers 07-077, ZEW - Leibniz Centre for European Economic Research.
    6. Amuedo-Dorantes Catalina & De la Rica Sara, 2006. "The Role of Segregation and Pay Structure on the Gender Wage Gap: Evidence from Matched Employer-Employee Data for Spain," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-34, April.
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    Cited by:

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    2. Melanie Jones & Ezgi Kaya, 2024. "Performance‐related pay and the UK gender pay gap," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 63(4), pages 512-529, October.
    3. Zane Varpina & Kata Fredheim, 2021. "What a manager wants: how return migrants’ experiences are valued by managers in the Baltics," SSE Riga/BICEPS Occasional Papers 12, Baltic International Centre for Economic Policy Studies (BICEPS);Stockholm School of Economics in Riga (SSE Riga).
    4. Maria Rouziou, 2019. "The contingent value of pay inequalities in sales organizations: integrating literatures in economics, management, and psychology," AMS Review, Springer;Academy of Marketing Science, vol. 9(3), pages 184-204, December.
    5. Xulia González & Rosa Loveira & Consuelo Pazó, 2022. "Performance pay, firm size and export market participation: Evidence from matched employer–employee data," LABOUR, CEIS, vol. 36(3), pages 342-366, September.
    6. Kato, Takao & Kodama, Naomi, 2017. "Women in the Workplace and Management Practices: Theory and Evidence," IZA Discussion Papers 10788, Institute of Labor Economics (IZA).
    7. Katarzyna Bech & Joanna Tyrowicz, 2017. "Estimating gender wage gap in the presence of efficiency wages -- evidence from European data," GRAPE Working Papers 20, GRAPE Group for Research in Applied Economics.
    8. Juho Jokinen & Jaakko Pehkonen, 2017. "Promotions and Earnings – Gender or Merit? Evidence from Longitudinal Personnel Data," Journal of Labor Research, Springer, vol. 38(3), pages 306-334, September.

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    More about this item

    JEL classification:

    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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