Abstract
The link between performance and pay should be strongest where performance is more accurately observed, Brown ( Industrial and Labor Relations Review, 1990, 43, 1655–1825; RAND Journal of Economics, 1992, 23, 366–375). More productive workers self-select into jobs with performance-based pay. Consequently, workers whose pay is based on performance should earn more than those whose pay is not based on such measures. This paper adds to the literature on the subject by providing new empirical evidence for Brown's model using the National Longitudinal Surveys of Youth (NLSY) data.
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