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The Trade-Off Between Supervision Cost and Performance-Based Pay: Does it Matter?

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  • Bradley Ewing
  • Phanindra Wunnava

Abstract

The study adds to the literature by providing new empirical evidence consistent with efficiency wage theory, and by providing estimates of the average cost of supervising a worker by industry. This research uses the 1996 wave of the NLSY and incorporates estimates of supervision cost computed from industry classifications. We further detect presence of no gender differences neither in risk-averseness nor in productivity gains associated with cost of Supervision and performance-based pay.

Suggested Citation

  • Bradley Ewing & Phanindra Wunnava, 2002. "The Trade-Off Between Supervision Cost and Performance-Based Pay: Does it Matter?," Middlebury College Working Paper Series 0232, Middlebury College, Department of Economics.
    • Handle: RePEc:mdl:mdlpap:0232
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    File URL: http://www.middlebury.edu/services/econ/repec/mdl/ancoec/0232.pdf
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    References listed on IDEAS

    as
    1. Leonard, Jonathan S, 1987. "Carrots and Sticks: Pay, Supervision, and Turnover," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 136-152, October.
    2. Ewing, Bradley T., 1996. "Wages and performance-based pay: Evidence from the NLSY," Economics Letters, Elsevier, vol. 51(2), pages 241-246, May.
    3. Edward P. Lazear, 2000. "The Power of Incentives," American Economic Review, American Economic Association, vol. 90(2), pages 410-414, May.
    4. Charles Brown, 1992. "Wage Levels and Method of Pay," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 366-375, Autumn.
    5. Jianakoplos, Nancy Ammon & Bernasek, Alexandra, 1998. "Are Women More Risk Averse?," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 620-630, October.
    6. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
    7. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    8. Goldin, Claudia, 1986. "Monitoring Costs and Occupational Segregation by Sex: A Historical Analysis," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 1-27, January.
    9. Lindbeck, Assar & Snower, Dennis J., 1987. "Efficiency wages versus insiders and outsiders," European Economic Review, Elsevier, vol. 31(1-2), pages 407-416.
    10. Daniel Parent, 1999. "Methods of Pay and Earnings: A Longitudinal Analysis," ILR Review, Cornell University, ILR School, vol. 53(1), pages 71-86, October.
    11. David S. Evans & Linda S. Leighton, 1989. "Why Do Smaller Firms Pay Less?," Journal of Human Resources, University of Wisconsin Press, vol. 24(2), pages 299-318.
    12. Ehrenberg, Ronald G & Bognanno, Michael L, 1990. "Do Tournaments Have Incentive Effects?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1307-1324, December.
    13. Sunden, Annika E & Surette, Brian J, 1998. "Gender Differences in the Allocation of Assets in Retirement Savings Plans," American Economic Review, American Economic Association, vol. 88(2), pages 207-211, May.
    14. Bradley T. Ewing & James E. Payne, 1999. "The Trade-Off Between Supervision and Wages: Evidence of Efficiency Wages from the NLSY," Southern Economic Journal, John Wiley & Sons, vol. 66(2), pages 424-432, October.
    15. Seiler, Eric, 1984. "Piece Rate vs. Time Rate: The Effect of Incentives on Earnings," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 363-376, August.
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    Cited by:

    1. Julie Chytilová, 2005. "Nerovnováha na trhu práce jako důsledek racionálního chování (model substitučního vztahu mezi výší mzdy a kvalitou monitoringu) [Non-clearing equilibrium on the labour market as a consequence of ra," Politická ekonomie, Prague University of Economics and Business, vol. 2005(3), pages 337-347.

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    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J7 - Labor and Demographic Economics - - Labor Discrimination

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