Performance pay and assortative matching
| Published date | 01 September 2021 |
| Author | Keith A. Bender,Colin P. Green,John S. Heywood |
| Date | 01 September 2021 |
| DOI | http://doi.org/10.1111/sjpe.12232 |
Scott J Polit Econ . 2021;68:485–493. wileyonlinelibrary.com/journal/sjpe
|
485
© 2019 Scottish Econ omic Society
1 | INTRODUCTION
In the past three decades performance pay receipt has risen, especially among high pay workers (Bell & Van
Reenen, 2014; Lemieux, MacLeod, & Parent, 2009). Thi s has been associated with increas ed individual earnings
inequality although the ex tent varies by country (Bryan & Bryson, 2016; Keng & Orazem, 2018; Lemiu ex et al.,
2009). Assortative matching on education has also risen (Chiappori, Salanié, & Weiss, 2017; Schwartz & Mare,
2005) and has been associated with increased household earnings inequality (Greenwood, Guner, Kocharkov, &
Santos, 2014; Keng & Orazem , 2018). Again, the extent varies by country with Eika, Mogsta d, and Safar (2018)
actually demonstrating that the increase in two college degree spouses largely reflects increasing educational
attainment (e specially by women) and that t he resulting measure s of assortative matchin g on education have only
modest influences on the time trend in household inequality.
We link these litera ture to make two related po ints using data from t he UK. First, we de monstrate that coup les
where both spouses receive performance pay is far more common than would be anticipated randomly. Thus,
spouses appear to match on performance pay receipt. Such matching may concentrate the earnings premiums
Accepted: 29 Aug ust 2019
DOI: 10 .1111/sjpe.1 2232
ORIGINAL ARTICLE
Performance pay and assortative matching
Keith A. Bender1| Colin P. Green2| John S. Heywood3
1University of Aberdeen, Aberdeen, UK
2Norwegian U niversity of Scien ce and
Technology, Trondheim, Norway
3Universit y of Wisconsin – Milwau kee,
Milwaukee, WI, USA
Correspondence
John S. Heywo od, University o f Wisconsin
– Milwaukee, Milwaukee, WI, USA.
Email: heywood@uwm .edu
Abstract
We show that couples sort on performance pay with dual
receipt couples much more likely than predicted by ran‐
dom. In addition, we show that the return to performance
pay appears largel y invariant to whether one's spouse earns
performance pay. The major exception is that among the
college educated, the return to performance pay is larger
for women when their spouse also receives performance
pay. Thus, dual receipt households concentrate the returns
to performance p ay hinting that performance pay may influ‐
ence the distribution of household income.
KEYWORDS
assortative matching, performance pay
JEL CLASSIFI CATION
J12; J33
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