Fred Henneberger
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PD Dr.
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Henneberger
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Fred
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fred.henneberger@unisg.ch

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  • Publication
    Sorting into Performance Pay
    (FAA-HSG, 2008-04)
    Henneberger, Fred
    ;
    Ziegler, Alexandre
    We investigate the observable determinants of sorting between salary and performance pay jobs, the extent to which wage functions differ between the two, and the magnitude of the unobserved ability differential between salary and performance pay workers. We find that several observables - in particular age, education, job complexity and tenure - have a large impact on both the likelihood and the magnitude of performance pay. The returns to performance pay are large, and wage functions differ markedly between salary and performance pay jobs. In particular, the earnings premia associated with several observables - age, job complexity and managerial position - are much larger for performance pay jobs than for salary jobs. A separate analysis of the base pay and bonus components of performance pay workers' earnings reveals the presence of insurance in these earnings - workers with high base pay also have large bonuses - and shows that base pay primarily rewards observables, while bonuses reward unobserved heterogeneity. The difference in unobserved ability between salary and performance pay workers is large, accounting for about half of the wage differential between both groups. Thus, unobserved ability appears to be the key driver of sorting between salary and performance pay jobs
    Type: discussion paper
    Issue: 116
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/78521
  • Publication
    Performance Pay, Sorting, and Outsourcing
    (Institute for the Study of Labor, 2007-03-15)
    Henneberger, Fred
    ;
    Sousa-Poza, Alfonso
    ;
    Ziegler, Alexandre
    Implementing performance pay requires that workers' output be measured. When measurement costs differ among firms, those with a measurement cost advantage choose to implement performance pay. They attract the best workers, and both the level and variability of compensation are higher at these firms than at salary firms. Workers may select firms with different compensation methods at different stages of their work life. Productive workers start at performance pay firms and switch to salary firms once their productivity is revealed. The magnitude of the resulting worker flows depends on the payoff from effort and is therefore related to the age profile of the wage differential between performance pay and salary firms. Advantages in measuring worker productivity constitute a plausible explanation for the emergence of specialized business related service (BRS) firms. Accordingly, BRS firms should make a much wider use of performance pay and employ better workers than diversified corporations. Data from the 1998 Swiss Wage Structure Survey confirm the model's predictions both for the economy at large and for BRS firms
    Type: discussion paper
    Issue: 3019
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/80905