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Don't Forget the Gravy! Are Bonuses and Time Rates Complements?

Green, Colin and Heywood, John (2012) Don't Forget the Gravy! Are Bonuses and Time Rates Complements? Working Paper. The Department of Economics.

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    The press often depicts bonuses as extra payments to the already well compensated and calls for reform. Yet, these calls typically ignore the efficiency argument that bonuses are potentially risky performance pay that substitute for salary compensation. This paper uses representative UK data to estimate that bonuses appear not to substitute for salary in cross-sectional estimates. Yet, when controlling for time invariant characteristics in panel data, bonuses emerge as substitutes. Each pound of bonus comes at a cost of 40 pence in other earnings. The degree of substitution is far larger at the bottom of the earnings distribution and far smaller at the top of the earnings distribution.

    Item Type: Monograph (Working Paper)
    Additional Information: 2012-008
    Subjects: H Social Sciences > HB Economic Theory
    Departments: Lancaster University Management School > Economics
    ID Code: 54555
    Deposited By: ep_importer_pure
    Deposited On: 25 May 2012 15:03
    Refereed?: No
    Published?: Published
    Last Modified: 17 Nov 2017 13:24
    Identification Number:

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