Who Wants Performance-Related Pay?
Using three-wave panel data of German establishments and their employees, this study investigates three characteristics of those who have performance-related pay (PRP): productivity, risk aversion, and inequity aversion. The results indicate that productivity is positively related to an employee having PRP and to the size of performance rewards. Productive employees self-select into PRP contracts, between and within firms. PRP is not found to be related to risk aversion or inequity aversion.