Incentive

Macroeconomics

Algorithm

Scheme (mathematics)

Statistics

Microeconomics

Sorting

Variables

Variable (mathematics)

Selection (genetic algorithm)

Economics

Computer science

Payment

Mathematics

Econometrics

Productivity

Mathematical analysis

Artificial intelligence

Revenue

Piece work

Finance

American Economic Review

This paper studies the impact of incentives on worker self-selection in a controlled laboratory experiment. Subjects face the choice between a fixed and a variable payment scheme. Depending on the treatment, the variable payment is a piece rate, a tournament, or a revenue-sharing scheme. We find that output is higher in the variable-payment schemes compared to the fixed-payment scheme. This difference is largely driven by productivity sorting. In addition, different incentive schemes systematically attract individuals with different attitudes, such as willingness to take risks and relative self-assessment as well as gender, which underlines the importance of multidimensional sorting. (JEL C91, D81, D82, J16, J31)

Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender