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.

[img]
Preview
PDF
Bonus_and_Salary_Wp.pdf - Submitted Version

Download (499kB)

Abstract

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
Uncontrolled Keywords:
/dk/atira/pure/researchoutput/libraryofcongress/hb
Subjects:
ID Code:
54555
Deposited By:
Deposited On:
25 May 2012 14:03
Refereed?:
No
Published?:
Published
Last Modified:
06 Apr 2020 23:40