TY  - JOUR
AU  - Brown,Charles
TI  - Firms' Choice of Method of Pay
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3065
PY  - 1990
Y2  - May 1990
UR  - http://www.nber.org/papers/w3065
L1  - http://www.nber.org/papers/w3065.pdf
N1  - Author contact info:
Charles C. Brown
Department of Economics
University of Michigan
Ann Arbor, MI  48109-1220
Tel: 734/763-3036
Fax: 734/647-1186
E-Mail: charlieb@umich.edu
AB  - Three types of pay-setting methods are piece rates (pay mechanically linked to output), merit pay (pay based on less formal judgments by one's supervisor), and standard rates (pay based on one's job classification and perhaps seniority, but not directly on performance). Firms' choice among methods depends on balancing the gains from more precise links between performance and pay against the costs of either precise or judgmental measures of output. Using data from the BLS Industry Wage Study program, hypotheses suggested by this observation are tested and for the most part confirmed. 
ER  -