SOEPpapers on Multidisciplinary Panel Data Research

Transcription

1 Deutsches Institut fü Witschftsfoschung SOEPppes on Multidiscipliny Pnel Dt Resech 136 Thoms Conelissen John S. Heywood Uwe Jijhn S, Pefomnce Py, Risk Attitudes nd Job Stisfction Belin, Octobe 008

2 SOEPppes on Multidiscipliny Pnel Dt Resech t DIW Belin This seies pesents esech findings bsed eithe diectly on dt fom the Gemn Socio- Economic Pnel Study (SOEP) o using SOEP dt s pt of n intentionlly compble dt set (e.g. CNEF, ECHP, LIS, LWS, CHER/PACO). SOEP is tuly multidiscipliny household pnel study coveing wide nge of socil nd behviol sciences: economics, sociology, psychology, suvey methodology, econometics nd pplied sttistics, eductionl science, politicl science, public helth, behviol genetics, demogphy, geogphy, nd spot science. The decision to publish submission in SOEPppes is mde by bod of editos chosen by the DIW Belin to epesent the wide nge of disciplines coveed by SOEP. Thee is no extenl efeee pocess nd ppes e eithe ccepted o ejected without evision. Ppes ppe in this seies s woks in pogess nd my lso ppe elsewhee. They often epesent peliminy studies nd e ciculted to encouge discussion. Cittion of such ppe should ccount fo its povisionl chcte. A evised vesion my be equested fom the utho diectly. Any opinions expessed in this seies e those of the utho(s) nd not those of DIW Belin. Resech disseminted by DIW Belin my include views on public policy issues, but the institute itself tkes no institutionl policy positions. The SOEPppes e vilble t Editos: Geog Men (Vice Pesident DIW Belin) Get G. Wgne (Socil Sciences) Jochim R. Fick (Empiicl Economics) Jügen Schupp (Sociology) Conchit D Ambosio (Public Economics) Chistoph Beue (Spot Science, DIW Resech Pofesso) Anit I. Deve (Geogphy) Elke Holst (Gende Studies) Fiede R. Lng (Psychology, DIW Resech Pofesso) Jög-Pete Schäple (Suvey Methodology) C. Kthin Spieß (Eductionl Science) Mtin Spieß (Suvey Methodology) Aln S. Zuckemn (Politicl Science, DIW Resech Pofesso) ISSN: (online) Gemn Socio-Economic Pnel Study (SOEP) DIW Belin Mohenstsse Belin, Gemny Contct: Ut Rhmnn uhmnn@diw.de

3 Pefomnce Py, Risk Attitudes nd Job Stisfction Thoms Conelissen*, John S. Heywood** nd Uwe Jijhn*** * Institute fo Empiicl Economic Resech, Leibniz Univesity of Hnove, Gemny ** Deptment of Economics, Univesity of Wisconsin-Milwukee, USA *** Institute fo Lbo Economics, Leibniz Univesity of Hnove, Gemny Abstct We pesent soting model in which wokes with gete bility nd gete isk tolence move into pefomnce py jobs nd contst it with the clssic gency model of pefomnce py. Estimtes fom the Gemn Socio-Economic Pnel confim testble implictions dwn fom ou soting model. Fist, pio to contolling fo enings, wokes in pefomnce py jobs hve highe job stisfction, poxy fo on-the-job utility. Second, fte contolling fo the highe enings ssocited with pefomnce py, the job stisfction of those in pefomnce py jobs is the sme s those not in such jobs. Thid, those wokes in pefomnce py jobs who hve gete isk tolence outinely epot gete job stisfction. While these findings suppot the soting model, they would not be suggested by the clssic gency model. JEL: D80, J4, J8, J33, M5. Keywods: Pefomnce Py, Woke Heteogeneity, Ability, Risk Pefeences, Soting. Coesponding Autho: Pivtdozent D. Uwe Jijhn, Leibniz Univesität Hnnove, Witschftswissenschftliche Fkultät, Institut fü Abeitsökonomie, Königswothe Pltz 1, Hnove, Gemny, Emil: jijhn@mbox.iqw.uni-hnnove.de, Phone: / , Fx: /76-897

4 1. Intoduction Pefomnce py hs been shown to incese woke poductivity, effot nd enings (Booth nd Fnk 1999, Lze 000, Oettinge 001, Psch & Shee 000, Pent 1999, Shee 004). Howeve, its effect on job stisfction emins less cle. Gete enings incese woke stisfction but pefomnce py lso inceses effot tht wokes dislike nd enings vitions tht educe the utility of isk vese wokes. Yet, if wokes e heteogeneous, pefomnce py cn induce self-soting by both bility nd isk pefeence. The consequence of such soting is tht the nticipted negtive influences of incesed effot nd isk my be melioted by obseving those wokes with the getest bility nd lest isk vesion eceiving the highe enings ssocited with pefomnce py. Lze (1986) nd Booth nd Fnk (1999) hve developed models of pefomnce py nd soting tht ssume wokes e heteogeneous with espect to thei bilities. 1 We extend those models to ccount fo diffeent isk ttitudes coss wokes. We model nd then test soting pocess which pedicts tht the moe ble nd moe isk tolent sot themselves into pefomnce py schemes nd tht thei on-the-job utility will be gete thn those who emin on time tes. Moeove, the two citicl soting dimensions intect. Cptuing the ent on bility equies soting into the pefomnce py secto nd mong those soting into pefomnce py, wokes with the getest isk tolence will eceive the getest on-the-job utility. Among those emining in the time te secto, thee should be no eltionship between isk tolence nd utility. Finlly, the model pesents mbiguous pedictions s to whethe o not wokes on pefomnce py will continue to eceive gete utility once the positive influence of highe enings is emoved. Howeve, the positive eltionship between isk tolence nd utility fo those on pefomnce py emins independent of the influence of highe enings. 1

5 The empiicl testing exploits unique question in the Gemn Socio-Economic Pnel (GSEOP) tht hs been shown to successfully identify isk tolence. Using job stisfction s n indicto fo on-the-job utility, we confim tht pefomnce py emeges s positive deteminnt of job stisfction. Moeove, mong those eceiving pefomnce py, gete isk tolence is ssocited with gete stisfction whees isk tolence plys no ole in job stisfction mong those on time tes. Finlly, holding enings constnt in the job stisfction estimtions cuses the coefficient on pefomnce py to move to sttisticl insignificnce suggesting equl stisfction in the two sectos. In contst, contolling fo enings doesn't chnge the positive link between isk tolence nd job stisfction. These findings fit the pedictions of ou soting model but e not esily econciled with the typicl gency model. In such model, the pincipl tdes-off the incesed effot ssocited with pefomnce py with the enings pemiums equied to compenste isk vese gents (e.g., Holmstom nd Milgom 1987, Gibbons 1998). The pincipl fces esevtion utility constint mong gents tht implies tht the on-the-job utility of gents eceiving pefomnce py equls tht of gents on time tes. This constint implies tht pefomnce py should not influence job stisfction nd tht fte enings e contolled fo, job stisfction should be lowe in the pefomnce py secto. Moeove, the typicl gency model pedicts tht thee should be no eltionship between isk ttitude nd job stisfction in the pefomnce py secto. If woke hs lowe degee of isk vesion, the employe educes the enings pemium tht compenstes fo the disutility of being n income isk. Only if enings e contolled fo, positive link should emege between isk ttitude nd stisfction. The next section sets the context by biefly exmining pst esech nd isolting ou e of inteest nd vlue dded. The thid section detils ou extension of the soting model in which

6 wokes sot on both bility nd isk pefeences. It dws the pedictions nd testble hypotheses. The fouth section pesents ou dt nd bsic methodology while the fifth section pesents the empiicl esults. A sixth section discusses obustness nd finl section dws conclusions nd suggests venues fo futue esech.. Pst Resech: Setting the Context In the lst decde economists hve dmticlly incesed the numbe of studies estimting the deteminnts of job stisfction. At the stt of the 1980s Btel (1981) found only hndful of studies of job stisfction by economists but moe thn 3500 by othe socil scientists. Yet, Hmemesh (004) emphsizes tht the ecent enty of economists into the field will not bing vlue if it only mens exmining new explntoy vibles with gete sttisticl sophistiction. Insted, he clls fo economists to use job stisfction mesues to test theoeticl pedictions bout woke behviou nd/o lbo mket functioning. In tking this cll seiously, we note tht t its best job stisfction ppoches mesue of on-the-job utility. As Hmemesh (001, p. ) puts it job stisfction is the only mesue "tht might be viewed s eflecting how (wokes) ect to the entie pnoply of job chcteistics" nd s such "it cn be viewed s single metic tht llows the woke to compe the cuent job to othe lbo mket oppotunities." We mke use of job stisfction to diffeentite two pol models of pefomnce py. The clssic model of gency involves the tde-off between incentives nd insunce viewing the isk imposed by pefomnce py s the mjo fcto tht constins its use (Pendegst 000). While the fim cn incese effot though pefomnce py, it must compenste isk vese wokes fo the gete enings isk. In designing pefomnce py, competition in the lbo 3

7 mket genetes esevtion utility constint tht the fim builds into its optimiztion. By impliction, on-the-job utility is identicl between those wokes eceiving pefomnce py nd those eceiving time tes nd, s consequence, job stisfction should be identicl. The ltentive soting model ssumes tht competition between fims dives economic pofits to zeo. Fims use pefomnce py to cuse moe ble wokes to sot into pefomnce py schemes (Lze 1986, Booth nd Fnk 1999). Thus, in the clssic windshield study hlf of the poductivity incese ssocited with inititing piece te cme fom moe poductive wokes being ttcted into the scheme (Lze 000). Similly, Soensen nd Gytten (003) find tht fully thid of the poductivity incese ssocited with pefomnce py mong Nowegin physicins is due to soting. Futhe, Cume nd Stefnec (007) show tht those wokes on pefomnce py hve highe bility (AFQT scoes), highe self-esteem nd less ftlistic ttitudes thn do those on time tes. 3 This is citicl s Bowles et l. (001) show tht ech of these chcteistics coelte with highe effot nd gete enings. Expeiments confim tht those with gete isk tolence, highe bility nd moe confidence tend to choose pefomnce py scheme in the lbotoy (Dohmen nd Flk 006). In this stnd of litetue, wokes who sot into pefomnce py cptue ent ssocited with thei bility. We dd to the self-soting model by eintoducing issues of isk. Yet, in the flvou of the soting model, we llow fo heteogenous isk pefeences. Thus, we epoduce the esult tht the moe ble sot into pefomnce py but mtch this with the pediction tht the moe isk tolent lso sot into pefomnce py. This expecttion hs ecently eceived empiicl suppot by Cdsby et l. (007). Using el-effot lbotoy expeiment, they show tht moe iskvese individuls e less likely to select py fo pefomnce. Similly, Belleme nd Shee (006) find in field expeiment tht wokes on piece tes in tee-plnting fim exhibit highe 4

8 isk tolence thn individuls epesenting bode popultions. Moe genelly Gund nd Sliwk (006) use the GSOEP to confim tht gete isk tolence stnds s positive deteminnt of eceiving pefomnce py. Howeve, they ssume stndd gency model to explin thei finding nd do not exmine the link between pefomnce py, isk tolence nd job stisfction. 4 While we e the fist to use job stisfction s citicl vible in distinguishing between soting nd gency models, we e not the fist to exmine pefomnce py schemes s deteminnt of job stisfction. Reseches in humn esouce mngement ecognize tht the stuctue, tnspency nd peceived finess of pefomnce py scheme will influence mesues of job stisfction (Miceli nd Mulvey 000 nd Bown 001). Moeove, it hs been thought tht wokes pefe employment envionments tht ewd thei poductivity nd tht such envionments e ssocited with incesed woke optimism nd stisfction (Bown nd Sessions 003). In ddition, few empiicl studies by economists estimte the diect link between pefomnce py nd job stisfction. Dgo et l. (199) use Austlin dt to confim tht the use of individul nd goup bonuses e positive deteminnt of job stisfction even fte contolling fo enings. Heywood nd Wei (006) exmine US dt finding tht while pefomnce py in genel tends to be ssocited with incesed stisfction, it is not unifom coss the viety of types of pefomnce py. McCuslnd et l. (005) uses dt fom the Bitish Household Pnel Study (BHPS) showing tht the influence of pefomnce py tends to incese stisfction fo the moe highly pid but lowe it fo the less highly pid. Both Geen nd Heywood (007) nd Pouliks nd Theodossiou (007) use the BHPS to contol fo individul fixed effects with the fome finding positive influence fo pefomnce py while the ltte tends to find n insignificnt influence. 5

9 Thus, the scnt pst litetue hs ledy poduced positive, negtive nd insignificnt coefficients. Impotntly, none of these pevious studies isolte the ole plyed by including o excluding the wge (they tend simply to contol fo it without comment) o exmine the intection of pefomnce py with isk ttitudes. And none consides the exmintion of pefomnce py s wedge to contst the implictions of the clssic gency model fom those of the soting model. In the next section we isolte the fundmentl testble hypothesizes tht emege fom ou ugmented soting model. 3. Theoy 3.1 The Model We extend the models of pefomnce py nd self-soting (Lze 1986 nd Booth nd Fnk 1999) to ccount fo the income isk ssocited with pefomnce py nd llow fo diffeent isk ttitudes coss wokes. We imgine two sectos, pefomnce py ( P ) nd time te (T ) nd ssume tht competition in poduct nd lbo mkets dives fims expected pofits to zeo. A woke s output is given by q = v + b with v = e + ε. Effot is denoted by e with e {0,1} nd is ultimtely consideed simple dichotomous decision of whethe o not to exet effot. The impct of effot on output depends on bility. Wokes hve heteogeneous bilities distibuted unifomly ove the intevl [ 0, ]. The vible ε eflects tht woke pefomnce is subject to ndom influences distibuted with men zeo nd vince bse skills identicl fo ll wokes. σ. 5 Finlly, b denotes The bse skills s well s the men nd the vince of the ndom influences e common knowledge nd ech woke knows his o he bility. Wokes choose between jobs in the pefomnce py secto nd in the time te secto. Afte choosing job, the woke 6

10 decides on level of effot e. Employes cnnot obseve, e ndε. Howeve, employes in the pefomnce py secto monito employee pefomnce q (o ltentively v ). Identifying individul woke pefomnce involves fixed cost m tht is ultimtely shifted to the woke becuse of the zeo pofit constint. The woke s emunetion in the pefomnce py secto thus equls his o he output q minus the monitoing cost: w P = v + b m. Thee is no monitoing in the time te secto nd ech woke eceives isk-fee enings w. We ssume expected woke utility cn be expessed by men-vince utility function: T EU = E[ w] C( e) 0.5V[ w]. (1) whee C (e) denotes the disutility of effot with C ( 0) = 0 nd C ( 1) = c ( c > 0 ). Risk pefeence is unifomly distibuted ove [, ] with < 0 nd > 0. Thus, isk neutl woke ( = 0 ) is not ffected by the income isk ssocited with pefomnce py. Income isk lowes the utility of isk vese wokes ( > 0 ) nd inceses the utility of isk loving wokes ( < 0 ). 3. Self-Soting nd Effot Choice As wokes in the time te secto hve no incentive to exet effot. Hence, ech woke s expected output is equl to the bse poductivityb. The zeo pofit condition implies tht the stight sly eflects this bse poductivity. Thus, woke s utility in the time te secto is: U = w b. () T T = If woke chooses job in the pefomnce py secto, he o she mximizes expected utility by the choice of effot. If c ( < c ), the woke chooses e = 1 ( e = 0 ). Hence, mximum expected utility of woke with given bility nd isk ttitude is: 7

11 EU P b m 0.5σ if < c, = + b m c 0.5σ if c. (3) A woke chooses job in the pefomnce py secto (time te secto) if EU U P T EU < ). We identify two self-soting equilibi. The fist is chcteized by m + 0.5σ > 0 ( P UT nd m + c + 0.5σ. In this equilibium, fo ech isk ttitude some wokes sot themselves into the time te secto while othes pefe the pefomnce py secto. Wokes in the pefomnce py secto lwys exet effot ( e = 1 ). The bility of woke indiffeent to secto, EU P = U T, cn be witten s function of his o he isk ttitude: * ( ) σ = m + c, (4) whee * inceses in. As show in Figue 1, wokes with bilities nd isk ttitudes lying bove the * line hve highe expected utility in the pefomnce py secto. Wokes with bilities nd isk ttitudes below the line hve highe utility in the time te secto. A second nd moe genel equilibium esults if m + 0.5σ < 0 nd < < m + c 0.5σ. As shown in Figue, now vey isk loving wokes ll sot themselves c + into the pefomnce py secto nd vey isk vese wokes ll sot themselves into the time te secto. Let us define: ' ' ' / σ Risk loving wokes with isk ttitudes ' = m, (5) ( ) / σ = m c. (6) sot themselves into the pefomnce py secto egdless of thei bilities. Howeve, bility plys ole in the effot choice of those wokes. If ' nd c ( > c ), wokes pefe job in the pefomnce py secto nd choose the effot level e = 0 ( e = 1 ). Risk vese wokes with isk ttitudes ' ' sot into the time te secto 8

12 9 egdless of thei bilities. Finlly, if woke s isk ttitude is chcteized by ' ' ' < <, the secto choice depends on his o he bility. If woke with given, hs bility gete (smlle) thn ) ( * fom (4), he o she pefes the pefomnce py secto (time te secto). 3.3 Testble Implictions of the Model While the focus of the nlysis is the equilibium shown in Figue, the popositions hold fo othe cses, e.g. tht shown in Figue 1. Consideing wokes with given isk pefeence nd tking (3) into ccount, the vege expected utility in the pefomnce py secto is: < < = c c P d f c m b F d f c m b d f m b EU ) *( 0 '. ' ' if ) ( ) 0.5 ( )] * ( [ 1 1, ' if ) ( ) 0.5 ( ) ( ) 0.5 ( ) ( σ σ σ (7) Tking (4) nd the unifom distibution of, we obtin: < < + + = ''. ' if ) ( ', if 0.5 ) ( 0.5 ) ( b c m m b c EU P σ σ (8) Using (5) nd (6) nd the distibution of, we deive the vege expected utility in the pefomnce py secto ove ll elevnt isk ttitudes:. ') '' )( 0.5( ) ' ( ) ' 0.5( ) ( ) '' ( 1 ) ( ) ( ) ( 0.5 ) ( 0.5 '') ( 1 } { } { ] [ ] [ ] [ '' ' ' c c b d f c m b d f m b c F EU P = = σ σ σ (9) The following poposition compes vege expected utility coss sectos.

13 Poposition 1. The vege expected utility is highe in the pefomnce py secto thn in the time te secto. The poof of Poposition 1 is pesented in the Appendix nd eflects two (ptilly ovelpping) types of soting. Fist, it eflects the ents of wokes with high bilities soting themselves into the pefomnce py secto tht ewds bility. Second, it eflects the moe isk loving wokes utility of eceiving wge tht is subject to ndom influences. Hence, the soting model yields pediction tht shply contsts with the ssumption mde in stndd pincipl-gent nlyses tht thee should be no eltionship between pefomnce py nd woke utility. As the wge is fixed in the time te secto, woke utility obviously does not depend on isk pefeences in this secto. In contst, fo the pefomnce py secto we obtin fom (8): 0.5σ EU P( ) / = 0.5σ if ', if ' < < ''. (10) Wokes in the pefomnce py secto elize smlle ent if they hve highe degee of isk vesion. This immeditely yields the following poposition. Poposition. Gete the isk vesion is ssocited with lowe expected utility in the pefomnce py secto but utility in the time te secto does not depend on isk ttitudes. The poposition eflects tht wokes with gete isk vesion benefit less fom woking in the pefomnce py secto ll else equl. Wokes in the pefomnce py secto eceive ent tht deceses in the degee of isk vesion. This lso contsts with esults fom the stndd gency models tht ssume tht if the gent is chcteized by highe degee of isk vesion, the 10

14 pincipl djusts the gent s wge such tht the gent still eceives his o he esevtion utility. Hence, the clssic gency model pedicts no eltionship between isk ttitude nd utility even if wokes eceive pefomnce pyment. As much of the benefit fom pefomnce py flows fom moe ble wokes ening highe wges, we now conside the utility diffeences coss sectos holding enings constnt. Poposition 3. If wges e netted out, vege expected utility in the pefomnce py secto my be highe, lowe o the sme s in the time te secto. The poof of Poposition 3 is in the Appendix but the notice tht the diffeence between sectos now depends only on the effot diffeence nd the isk diffeence. If wokes in the pefomnce py secto e isk vese, they will suffe both the disutility of effot nd the disutility esulting fom the income isk. If wokes in the pefomnce py secto e isk loving, two opposing components emin, nmely the disutility of effot nd the utility of hving n uncetin income. This poposition cn lso be contsted with the implictions of the clssic gency model. In tht model enings compenste gents fo thei disutility of effot nd fo thei disutility of income isk. As wokes e typiclly ssumed to be isk vese, cle negtive eltionship between pefomnce py nd utility emeges fte contolling fo the compensting wges. Ou ppoch tkes into ccount tht t lest some wokes my be isk-loving implying n mbiguous eltionship between pefomnce py nd utility fte contolling fo enings. Finlly, the following poposition consides the eltionship between isk ttitude nd job stisfction when wges e netted out. Poposition 4. Even if wges e netted out, gete isk vesion is ssocited with lowe 11

15 vege expected utility in the pefomnce py secto. Woke utility in the time te secto emins independent of isk ttitudes. The poof of Poposition 4 is gin in the Appendix. Citiclly, while ou model pedicts negtive ssocition between isk vesion nd utility egdless of whethe o not enings e contolled fo, the clssic gency model pedicts negtive ssocition only fte contolling fo wges. This follows becuse the pincipl sets the wge to compenste the gent fo the disutilty of isk. Thus, only when the influence of this compensting wge is emoved (held constnt) will the negtive eltionship between isk vesion nd utility be eveled. Ou empiicl sttegy to test the popositions is s follows: Poposition 1 coesponds to job stisfction egession tht includes pefomnce py s n explntoy vible but no contol fo enings, while Poposition 3 cn be exmined by estimting job stisfction fte ccounting fo enings. Popositions nd 4 suggest septe job stisfction estimtions fo wokes eceiving time tes nd pefomnce py gin with nd without contols fo wges. 4. Dt nd Methodology We dw ou dt fom the 004 wve of the Gemn Socio-Economic Pnel. This is the only ye to sk the unique question on isk pefeence nd to include infomtion on pefomnce ppisls. We limit ou smple to West Gemn pivte secto wokes unde the ge of 60. This eflects the usul etiement ge nd ou concen tht the pivte secto is moe likely to hve the competitive mkets ssocited with the soting model. 6 We exclude wokes of foeign ntionlity nd lso those in fishing, foesty nd gicultue. 7 The esulting smple consists of ll 374 obsevtions fo which infomtion is vilble. The indicto of pefomnce py is built up fom two stge question sking fist if the 1

16 woke is subject to pefomnce ppisl nd secondly, whethe tht pefomnce ppisl hs consequences fo his o he enings. If both questions e nsweed ffimtively, we conside the woke subject to pefomnce py scheme. We ecognize tht this identifies both wokes who eceive vible py tied to pefomnce such s bonus nd lso wokes who hve gowth in thei bsed py te tied to pefomnce (Milkovich nd Widgo 1991). This is the sme vible constucted by Gund nd Sliwk (006) nd seves s bod definition of pefomnce py. Thus, while slightly moe thn 5 pecent of GSOEP wokes identify themselves s subject to pefomnce py, this cn be comped with the incidence of individul pefomnce py in the US Ntionl Longitudinl Suvey fo the lte 1980s of just bove 0 pecent (Geddes nd Heywood 003). The job stisfction indicto is fily stndd mesue of ovell stisfction tht nges fom 0 low to 10 high. 8 As the numbe of wokes giving vey low evlutions is extemely smll we combine ctegoy 0 nd ctegoy 1. The esulting ten point scle foms the dependent vible to be fit though odeed pobit to cumultive noml distibution. The unique mesue of isk lso eflects scle fom 0 to 10. Highe scoes e moe willing to tke isks. Citiclly, this mesue hs been vlidted by Dohmen et l. (005) who demonstte it is vey highly coelted with ctul isk tking in lottey expeiments. Thus, s Gund nd Sliwk (006 p. 6) put it "(f)o the fist time, it is theefoe possible to nlyse the link between individul isk vesion nd pefomnce bsed py with field dt." While they confim link between isk pefeences nd pefomnce py, they do not exmine job stisfction. Tble 1 lists the definitions fo ll vibles. Tble shows the distibution of the job stisfction vible nging fom 1 (lowest) to 10 (highest). Wokes in the smple e quite stisfied. Nely 50 pecent epot job stisfction of 8 o highe on the 10 point scle. The 13

17 distibution of isk tolence shown in Tble is moe symmetic. The mode nd the medin e t the vlue of 5 out of the scle nging fom 0 (not t ll willing to tke isks) to 10 (vey willing to tke isks). Tble 3 beks down the smple sttistics by py scheme. It confims tht those who eceive pefomnce py e dispopotiontely mle, tend to wok in lge fims, wok between five nd six hous moe week nd en substntilly moe. 9 They lso epot slightly highe job stisfction on vege nd highe isk tolence on vege. At issue is whethe tht slightly highe job stisfction emins in the fce of contols nd whethe it becomes negtive fte contolling fo income s the clssic gency theoy would pedict. We initilly estimte fily stipped down job stisfction eqution. The psimony eflects ou desie to keep enings nd mjo individul specific enings deteminnts out of the initil eqution. Additionl stges will dd the enings mesue nd then full set of contols. We will epoduce this thee step pocedue including t ech stge the mesue of isk tolence. Finlly, we will epoduce the pocedue limiting ou smple to those ening pefomnce py. In this wy we will be ble to povide empiicl evidence on the fou hypotheses outlined in the pevious section. 5. Empiicl Results Tble 4 outlines ou pocedue using the initil psimonious eqution nd then ugmenting it fist with enings nd then with othe enings deteminnts. The estimtion involves the simultneous detemintion of the nine cut points but they e suppessed to sve spce. The esults confim tht woking in lge fims is ssocited with lowe stisfction nd tht the inbility to wok the desied hous is lso ssocited with significntly lowe stisfction. The contols fo ge nd gende do not emege s significnt. Impotntly, the pesence of 14

18 pefomnce py is ssocited with significntly highe job stisfction. The mginl effects computed t mens indicte tht wokes with pefomnce py e 3.7 pecentge points moe likely to epot one of the thee highest job stisfction ctegoies. This epesents substntil influence. Indeed, the mginl effect of pefomnce py on stisfction equls in mgnitude (lthough the opposite in sign) tht of 7 hous pe week gp between ctul nd desied hous. While modest dditions o substctions of contols leve the bsic pefomnce py esult in tct, it is immeditely eliminted by the single contol fo enings. This estimtion is shown in column nd evels tht highe enings stnd s cucil deteminnt of ovell job stisfction. Citiclly, the ddition of the enings vible cuts the size of the coefficient on pefomnce py to oughly thid of its pevious size nd dops it well below sttisticl significnce. We tke this s evidence in ccod with both Popositions 1 nd 3 fom ou ugmented soting model. Excluding the enings mesue, wokes ening pefomnce py tend to epot highe job stisfction but fte holding income constnt thei job stisfction is insignificntly diffeent fom those not on pefomnce py. The finl column in Tble 4 dds othe elevnt contols tht might influence job stisfction including enings deteminnts (eduction nd tenue). The bsic stoy emins unchnged. The coefficient on pefomnce py shinks gin but emins positive nd f fom significnce. Thus, despite esonbly compehensive set of contols, the job stisfction of pefomnce py wokes equls tht of othe wokes even when holding thei enings equl. This would seem consistent with ent being ened by the wokes in the pefomnce py secto s we know they e ctully hve gete enings. Moe pointedly, the pediction of the clssic gency model would be tht once enings e held constnt, those in the pefomnce py secto should hve lowe job stisfction s they must fce dditionl isk. In the soting 15

19 model, this pediction is offset by the gete bility nd gete isk tolence of those ening pefomnce py nd by the bsence of the esevtion utility constint. Tble 5 epets the pesenttion just outlined but includes the mesue of isk tolence. The psimonious estimtion suggests tht both pefomnce py nd gete isk tolence independently detemine job stisfction. The coefficient on pefomnce py etins the sme size nd sttisticl significnce s it did in the eqution without the mesue of isk tolence. Those ening pefomnce py epot gete job stisfction. At the sme time those wokes with gete isk tolence lso ppe to epot somewht highe job stisfction. The second column dds the enings mesue to the estimtion gin eliminting the size nd significnce of the coefficient on pefomnce py. At the sme time, the coefficient on isk tolence shinks (lbeit not s dmticlly) nd it lso dops below typicl mesues of significnce. The full estimtion meely einfoces these esults. Thus, both of the supposed soting dimensions pesent simil pictue. Yet, the model pesumes tht those not on pefomnce py fce no enings isk nd, s consequence, diffeences in isk pefeence should not diectly influence stisfction. As mde cle by Poposition, isk tolence mttes only fo those ctully fcing enings isk. Tbles 6 nd 7 diectly exmine this by epoducing the egessions of job stisfction on isk tolence but doing so septely fo those wokes eceiving nd not eceiving pefomnce py. The esults stongly suppot Poposition with vey lge nd positive coefficient on the isk tolence mong those eceiving pefomnce py (Tble 6) but indicting no ole plyed by isk tolence fo those not eceiving pefomnce py (Tble 7). In tems of mginl effects, one point incese in isk tolence inceses the pobbility of epoting one of the thee highest job stisfction ctegoies by.3 pecentge points mong those eceiving pefomnce py. 16

20 To test Poposition 4, we dd enings to the bsic specifictions of Tble 6 nd 7. The esults confim the theoeticl expecttion with the positive ssocition between isk tolence nd job stisfction emining fo those on pefomnce py but bsent fo those not on pefomnce py. Adding futhe contols does not chnge the ptten of esults. The esults of column o 3 in Tble 6 cn be used to undestnd the quntittive significnce of isk tolence in the pefomnce py secto. The tio of the mginl effects of isk tolence nd enings is bout 0.7, indicting tht n incese in isk tolence of 1 point in the pefomnce py secto yields job stisfction equivlent to 700 Euos of monthly goss enings, vey sizble effect. 6. Robustness nd Citicism of the Coss-sectionl Appoch A potentil concen with ou empiicl esults is thei elince on coss-sectionl estimtes. This elince is necessitted by the vilbility of the pefomnce py indicto in only single wve of the GSEOP. Even if such dt existed, ou fundmentl theoy of soting diffes fom the clssic soting ssocited with pnel dt techniques. Fo instnce, ou model gues tht wokes with gete bility cptue ent in the pefomnce py secto. This diffes fom contention tht pefomnce py is ssocited with ent fo ny woke. Typicl pnel estimtes with woke fixed effects could test the second clim by holding constnt unmesued bility. Yet, holding bility constnt would wsh out much of wht inteests us s ou model focuses on the diffeence between those with high nd low bility. Yet, even if the coss-section estimtes emin elevnt, we cn emphsize the diffeences between ou soting model nd the clssic gency model by consideing the consequences of holding bility constnt. In the clssic gency model, the fim pys wge pemium to wokes to compenste fo gete isk. As stessed, if this wge is held constnt, the gete isk should esult in wokes 17

21 on pefomnce py being less stisfied, hving lowe utility. Ou inbility to find this esult empiiclly might incoectly esult if pefomnce py is ssocited with unmesued bility nd if unmesued bility is ssocited with gete stisfction. In this view, the moe ble e simply moe stisfied in eithe secto (they don't cptue etun on bility in only one secto) but e dispopotiontely in the pefomnce py secto geneting n upwd bis in the cosssectionl estimte. Absent this bis, we would uncove the negtive influence of pefomnce py on stisfction stessed by the gency model. While we cnnot diectly test this without vition in the citicl vibles ove time, we do undetke viety of elted tests nd find little evidence of such bis. As fist obustness check, we simply dd dditionl vibles tht might poxy bility. To ou most complete specifiction in Tble 4 we dd indictos of helth sttus, height (nd height intected with gende) nd the eduction of the espondent's mothe. The coefficient on pefomnce py emins positive but insignificnt s it did in Tble 4. As second check, we conjectue tht if the woke fixed effects tht emege fom pnel estimte of wges contol fo the influence of unmesued bility, those effects e likely to be vey highly coelted with the influence of unmesued bility tht would emege fom pnel estimte of job stisfction. Thus, we use ll wves of the GSEOP fom estimting n unblnced fixed effects pnel wge eqution. 10 Rthe thn being inteested in the estimted coefficients of the wge deteminnts, we etin the ctul fixed effects s they cptue the woke specific component thought to include unmesued bility. This new vible of the woke fixed effects fom the wge eqution is etuned to the ultimte eqution in Tble 4. The coefficient on pefomnce py emins positive but insignificnt. These two estimtes e shown in the fist two columns of Tble 8 nd we note tht dding simultneously the ugmented contols nd woke enings 18

22 fixed effect does not chnge this pictue. Thus, despite ou best ttempts, we find no evidence tht pefomnce py is ssocited with diminished utility s suggested by the gency model. The one pesistent significnt esult emins tht the moe isk tolent e moe stisfied but only mong those eceiving pefomnce py. This we took s evidence tht the isk tolent eceive ent when soting into pefomnce py jobs. Agin, this might be citicized if one felt tht isk tolence eflected unmesued bility nd the moe ble e moe stisfied. While such citicism might lso cll fo woke fixed effect estimtes, we note tht this supposed eltionship does not hold in the time te secto. In tht secto, vitions in isk tolence do not coelte with job stisfction. Thus, the citicism would need to be tht isk tolence eflects unmesued bility but lgely in the pefomnce py secto. Be tht s it my, we institute ou set of obustness checks on the pefomnce py subsmple. We fist dd the dditionl contols tht my diectly poxy bility in ou initil nd most complete specifictions fom Tble 6. As columns 3 nd 4 of Tble 8 show, this does not chnge the positive nd significnt coefficient on the isk tolence mesue. We next ecove the woke specific fixed effect fom pnel wge estimte nd dd it s contol. Agin, it does not chnge the ptten of esults s shown in columns 5 nd 6 of Tble 8. We note tht simultneously including both the ugmented contols nd the fixed effects lso fils to dislodge the significnt positive coefficient on the isk tolence mesue. Finlly, we note tht the sme set of obustness checks leve the coefficient on the isk tolence mesue f fom significnt in the time te secto (the point estimtes e essentilly zeo). As consequence, we emin confident tht diffeence exists in the ole tht isk ttitude plys in detemining job stisfction in the two sectos. They ply no ole in the time te secto but gete isk tolence is ssocited with highe stisfction in the pefomnce py 19

23 secto. Citiclly, this emins tue in the sme seies of obustness checks tht do not include the enings mesue. In sum, ou checks continue to confom to the implictions of the soting model the thn the gency model. 7. Conclusions This study uses job stisfction s mesue of on-the-job utility in ode to contst soting model fom the clssic gency model. In the ltte, the wokes etin no ents. The dditionl enings they eceive fom pefomnce py exctly offsets the utility lost fom being subject to enings isk nd fom exeting effot. Thus, wokes should eceive the sme utility in ech secto nd fte contolling fo enings, those eceiving pefomnce py should hve lowe utility. Insted, ou empiicl esults suggest highe job stisfction fo those eceiving pefomnce py both in the simple compisons nd the psimonious egessions. Once enings, nd ultimtely mny othe contols, e included, this dvntge becomes insignificntly diffeent fom zeo. In none of ou estimtions, cn we find lowe job stisfction fo those eceiving pefomnce py despite the use of mny, mny contols. These esults ccod with ou soting model in which the moe ble nd moe isk tolent cptue ents. We lso isolte the ole of isk tolence in the soting model. The model pedicts tht it should mtte only mong those eceiving pefomnce py nd should do so with o without contolling fo enings. Indeed, we confim this pediction using the unique isk tolence vible. Gete isk tolence is stong positive deteminnt of job stisfction mong those eceiving pefomnce py but plys no ole mong those not eceiving pefomnce py. We ecognize tht contsting the clssic gency model with the soting model leves excluded ltentive models tht could pedict eltionship between pefomnce py nd job 0

24 stisfction. Fist, the gency model cn be mended in vious wys to suggest tht pefomnce py wokes etin ent. Pehps fist mong these mendments is the limited libility ssumption. Inteestingly, pefomnce py in fce of limited libility constint hs implictions simil to those nlyzed in the efficiency wge litetue (Foste nd Wn 1984, Lffont nd Mtimot 00: pp , Jijhn 006). Wokes queue fo jobs in which they cn eceive ent while employes will be eluctnt to invest in ceting such jobs. On the othe hnd, othe theoies hve suggested tht pefomnce py should be ssocited with lowe utility. Thus, wokes my ce not only bout thei own enings but the implictions of the gete enings dispity ssocited with pefomnce py (Kennedy 1995). This dispity cn be sufficient to lowe both mole nd poductivity. Altentively, McCuslnd et l. (005) suggest tht wokes my see pefomnce py s fom of contol nd tht the esulting loss of utonomy lowes utility. While lowe mol nd loss of utonomy my hppen in some cicumstnces, ou esults find no suppot fo the genel contention tht pefomnce py is ssocited with lowe job stisfction but insted tht the highe enings bing highe job stisfction to those on pefomnce py. Agin, even holding enings constnt, pefomnce py is ssocited with oughly simil job stisfction s othe foms of pyment. 1

25 Appendix Poof of Poposition 1 If lies in the intevl ( ', '' ), wokes with the sme isk ttitude sot ptilly in the time te nd ptilly in the pefomnce py secto. Hence, we compe vege expected utility fo given isk ttitude. Avege expected utility in the time te secto follows immeditely fom (): EU = EU T ( ) = U b. (A.1) T T = Tking (8) nd (A.1) into ccount, we obtin: EU P ( ) EU T ( ) = 0.5( m c 0.5σ ). (A.) Fom (6) it follows tht this diffeence is positive if < ' '. Thus vege expected utility is highe in the pefomnce py secto fo ech given lying in the intevl ( ', '' ). Comping vege expected utility ove ll isk ttitudes using (9) nd (A.1) yields: EU P 1 ( c) {[ EU T = + 0.5( ' ) σ ]( ' ) + 0.5( c)( '' ' )}. (A.3) ( '' ) As c > 0, '' ' > 0, '' > 0 nd ' > 0, the diffeence in (A.3) is positive. Poof of Poposition 3 Fo the pefomnce py secto, define expected utility net of wges s EV = EU E w ). Tking (3) into ccount, we obtin: P P ( P EV P 0.5σ if < c, = c 0.5σ if c. (A.4) Consideing wokes with given isk pefeence, the vege expected utility net of wges is:

26 EV P c ( 0.5σ ) f ( ) d + ( c 0.5σ ) f ( ) d if ', 0 c ( ) = 1 ( c 0.5σ ) f ( ) d if ' < < ''. 1 F[ * ( )] *( ) (A.5) Tking (4) nd the unifom distibution of into ccount, this yields: c c 0.5σ if ', EV P( ) = c 0.5σ if ' < < ''. (A.6) Fom the unifom distibution of, we cn clculte fo the pefomnce py secto vege expected utility net of wges ove ll elevnt isk ttitudes: EV P 1 c = [ c 0.5σ ] f ( ) d + F( '' ) 1 = '' { { ' ( '' ) ( ' ) c c 0.5σ [ '' ' [ ( '' ) c 0.5σ ( ) ] }. ] f ( ) d } (A.7) Netting out wges in the time te secto yields V U w = 0. (A.8) T = T T To pove Poposition 3, we thus hve to show tht vege expected utility in the pefomnce py secto my be positive, zeo o negtive fte netting out wges. If lies in the intevl ( ', '' ), wokes with the sme isk ttitude sot ptilly in the time te nd ptilly in the pefomnce py secto. Hence, we cn compe vege expected utility fo given isk ttitude. Fom (A.6) it follows tht EV P ( ) 0 if c 0.5σ nd EV P ( ) < 0 if c > 0.5σ. 3

27 Futhemoe, we cn compe vege expected utility net of wges ove ll isk ttitudes. Noting tht > c nd '' > ' it follows tht c [( '' ) ( ' ) c]/ < 0. Hence, if isk vese wokes dominte the pefomnce py secto, i.e. ' ' >, (A.7) clely implies EV P < 0. Howeve, if isk loving wokes dominte the pefomnce py secto, i.e. ' ', then depending on the pmetes EV P my be positive, negtive o equl to zeo. Poof of Poposition 4. Fom (A.8) it follows tht V T / = 0 nd fom (A.6) it follows tht EV P ( ) / = 0.5σ if ' '. 4

28 Tble 1: Vible Definitions (Gemn Socio-Economic Pnel, 004 Wve) Job Stisfction Pefomnce Py Risk Tolence Wge Size 1 Size Size 3 Age Age Squed Eduction Tenue Mle Hous Gp Actul hous Occuption Dummies Industy Dummies Ovell stisfction on the job coded fom 1 (lowest) to 10 (highest); the oginl ctegoy 0 is meged with 1 Dummy = 1 if the woke fces egul ppisl tht hs consequences fo his o he enings Coded fom 0 (not t ll willing to tke isks) to 10 (vey willing to tke isks) Monthly goss enings in thousnds of Euos Dummy = 1 if woke is in fim with 0 to 00 employees Dummy =1 if woke is in fim with 01 to 000 employees Dummy = 1 if woke is in fim with moe thn 000 employees Age in yes of the woke Age in yes of the woke squed Yes of schooling Numbe of yes with the cuent employe Dummy = 1 if the woke is mle Absolute diffeence between ctul nd desied woking time Actul weekly woking hous 5 dummy vibles ceted fom 3 levels of skill hiechy fo blue coll wokes nd 3 levels of skill hiechy fom white coll wokes 7 bod 1 digit contols fo industil secto 5

29 Tble : Distibutions of Job Stisfction nd of Risk Tolence Job Stisfction (Pecent) Risk Tolence (Pecent) Totl N = 374 6

30 Tble 3: Smple Mens nd Stndd Devitions Vibles Pefomnce Py = 0 Pefomnce Py = 1 Job Stisfction 6.97 (1.99) 7.11 (1.87) Risk Tolence 4.70 (.05) 5.07 (.0) Fim Size (.464).185 (.389) Fim Size.181 (.385).78 (.449) Fim Size (.360).475 (.499) Age 40.5 (9.66) 40.6 (9.08) Age Squed 1734 (779) 1735 (74) Mle.56 (.499).704 (.457) Hous Gp 5.7 (6.97) 6.06 (6.99) Wge.41 (1.78) 3.84 (.) Actul Hous 36.9 (1.7) 4.5 (9.67) Eduction 1.1 (.38) 13.3 (.8) Tenue 9.39 (8.61) 11.3 (9.65) N

31 Tble 4: Bsic Results: Pefomnce Py nd Job Stisfction Vibles 1 3 Pefomnce py.094** [.037] (.5).075 [.011] (0.66).0135 [.0054] (0.3) Fim Size ** [-.043] (.3) ** [-.058] (3.11) -.137** [-.055] (.8) Fim Size [-.09] (1.40) ** [-.05] (.48) ** [-.045] (.05) Fim Size ** [-.048] (.36) -.056** [-.081] (3.89) ** [-.065] (.89) Age.0106 [.004] (0.77).009 [.001] (0.1) [-.000] (0.03) Age Squed [-.0001] (1.10) [-.0001] (0.77) [ ] (0.41) Mle.048 [.0099] (0.71) ** [-.038] (.43) * [-.031] (1.67) Hous Gp -.018** [-.0051] (4.39) ** [-.0067] (6.6) ** [-.0064] (5.65) Wge.084** [.038] (7.47).0775** [.031] (5.47) Actul Hous [-.0011] (1.33) Eduction -.039** [-.013] (3.79) Tenue ** [-.008] (.97) Occuptionl Contols No No Yes Industil Contols No No Yes Chi-squed 39.3** 99.8** 14.8** N T-sttistics e in pentheses nd mginl effects e in sque bckets. Mginl effects e clculted t the mens on the pobbility of nsweing one of the thee highest stisfction ctegoies. **Sttisticlly significnt t the five pecent level; *t the ten pecent level. 8

32 Tble 5: Results with Risk Pefeence: Pefomnce Py nd Job Stisfction Vibles 1 3 Pefomnce py.090** [.036] (.0).068 [.011] (0.65).0131 [.005] (0.31) Risk Tolence.0156* [.006] (1.77).11 [.005] (1.6).009 [.004] (1.03) Fim Size ** [-.045] (.38) ** [-.059] (3.15) ** [-.055] (.85) Fim Size [-.031] (1.47) ** [-.053] (.5) ** [-.046] (.09) Fim Size ** [-.050] (.45) -.075** [-.08] (3.93) ** [-.066] (.9) Age.015 [.005] (0.90).0043 [.00.] (0.31) [.0003] (0.06) Age Squed [-.0001] (1.1) [-.0001] (0.85) [ ] (0.48) Mle.0117 [.005] (0.3) ** [-.041] (.61) * [-.034] (1.8) Hous Gp -.013** [-.005] (4.5) ** [-.007] (6.34) -.016** [-.007] (5.70) Wge.0814** [.03] (7.33).0769** [.031] (5.41) Actul Hous [-.001] (1.3) Eduction -.037** [-1.3] (3.78) Tenue ** [-0.3] (.93) Occuptionl Contols No No Yes Industil Contols No No Yes Chi-squed 43.0** 101.3** 144.7** N T-sttistics e in pentheses nd mginl effects e in sque bckets. Mginl effects e clculted t the mens on the pobbility of nsweing one of the thee highest stisfction ctegoies. **Sttisticlly significnt t the five pecent level; *t the ten pecent level. 9

33 Tble 6: Results Limited to Those with Pefomnce Py: Risk nd Job Stisfction Vibles 1 3 Risk Tolence.068** [.05] (3.37).0559** [.0] (.97).0587** [.03] (3.09) Fim Size [-.016] (0.3) [-.049] (0.74) [-.051] (0.79) Fim Size.1711 [.068] (1.07).0864 [.034] (0.54).1076 [.043] (0.67) Fim Size [.07] (0.44) [-.04] (0.38) [-.07] (0.4) Age [-.014] (1.15) * [-.0] (1.75) * [-.04] (1.9) Age Squed.0003 [.0001] (0.77).0005 [.000] (1.3).0005 [.000] (1.35) Mle.0004 [.000] (0.01) [-.048] (1.40) [-.044] (1.18) Hous Gp [-.00] (1.00) -.013** [-.005] (.9) * [-.004] (1.8) Wge.0831** [.033] (3.88) 0.085** [.033] (3.19) Actul Hous ** [-.005] (.47) Eduction [-.007] (1.13) Tenue.0007 [.0003] (0.15) Occuptionl Contols No No Yes Industil Contols No No Yes Chi-squed 8.4** 46.** 75.58** N T-sttistics e in pentheses nd mginl effects e in sque bckets. Mginl effects e clculted t the mens on the pobbility of nsweing one of the thee highest stisfction ctegoies. **Sttisticlly significnt t the five pecent level; *t the ten pecent level. 30

34 Tble 7: Results Limited to Those without Pefomnce Py: Risk nd Job Stisfction Vibles 1 3 Risk Tolence.008 [.001] (0.8) [-.0004] (0.10) [-.0016] (0.40) Fim Size ** [-.039] (.01) ** [-.053] (.71) -.173** [-.050] (.47) Fim Size * [-.043] (1.86) ** [-.067] (.88) ** [-.059] (.4) Fim Size ** [-.059] (.56) -.** [-.087] (3.75) ** [-.068] (.7) Age.008 [.008] (1.35).0149 [.006] (0.96).0133 [.005] (0.83) Age Squed [-.0001] (1.51) [-.0001] (1.31) [-.0001] (1.03) Mle [.007] (0.68) ** [-.040] (.4) [-.033] (1.48) Hous Gp -.015** [-.006] (4.68) ** [-.007] (5.97) ** [-.007] (5.54) Wge.08419** [.034] (6.60).079** [.03] (4.81) Actul Hous [-.0004] (0.50) Eduction ** [-.015] (3.55) Tenue ** [-.004] (3.14) Occuptionl Contols No No Yes Industil Contols No No Yes Chi-squed 34.7** 78.8** 11.03** N T-sttistics e in pentheses nd mginl effects e in sque bckets. Mginl effects e clculted t the mens on the pobbility of nsweing one of the thee highest stisfction ctegoies. **Sttisticlly significnt t the five pecent level; *t the ten pecent level. 31

35 Tble 8: Robustness Checks Full Smple Pefomnce Py Subsmple Pefomnce Py (0.70) (0.1) Risk Tolence 0.050** (.63) 0.049** (.45) 0.054** (.84) 0.053** (.79) Bd Helth ** (8.45) ** (8.95) ** (8.8) Body Height (0.13) (1.7) (1.6) Body Height x Mle (0.506) 0.03* (1.77) 0.00 (1.54) Mothe's Eduction (0.98) (1.4) ** (1.70) Wge Fixed Effect ** (.76) 0.363** (3.5) (0.07) Actul Wge 0.070** (4.67) 0.10** (6.01) 0.07** (.67) 0.087** (.56) Additionl Yes Yes No Yes No Yes Contols Occuptions Yes Yes No Yes No Yes Industies Yes Yes No Yes No Yes N Notes: Ech estimtion includes the set of contols identified in column one of Tble 4. The "dditionl contols" e those dded in column thee of Tble 4. **Sttisticlly significnt t the five pecent level; *t the ten pecent level. 3

36 Figue 1: σ m > 0 nd m + c + 0.5σ m + c + 0.5σ *() m + c + 0.5σ c 0 33

37 Figue : m + 0.5σ < 0 nd c < < m + c + 0.5σ *() c m + c + 0.5σ ' 0 '' 34

38 Refeences Ackebeg, Dniel A. nd Mistell Botticini. 00. Endogenous Mtching nd the Empiicl Deteminnts of Contct Fom. Jounl of Politicl Economy 110: Btel, Anne P "Rce Diffeences in Job Stisfction: A Reppisl," Jounl of Humn Resouces 16: Belleme, Chles nd Buce S. Shee Soting, Incentives nd Risk Pefeences: Evidence fom Field Expeiment. IZA Discussion Ppe No. 7, Bonn. Benbou, Rolnd nd Jen Tiole Intinsic nd Extinsic Motivtion. Review of Economic Studies 70: Booth, Alison L. nd Jeff Fnk Enings, Poductivity, nd Pefomnce-Relted Py. Jounl of Lbo Economics 17: Bowles, S., H. Gintis nd M. Osbone The Deteminnts of Enings: A Behviol Appoch, Jounl of Economic Litetue 39: Bown, Michelle "Unequl Py, Unequl Responses? Py Refeents nd thei Implictions fo Py Level Stisfction," Jounl of Mngement Studies 38: Bown, Sh nd John G. Sessions "Attitudes, Expecttions nd Shing," Lbou 17: Cdsby, C. Bm, Fei Song nd Fncis Tpon Soting nd Incentive Effects of Py fo Pefomnce: An Expeimentl Investigtion, Acdemy of Mngement Jounl 50: Clk, Andew "Wht Relly Mttes in Job? Hedonic Mesuement Using Quit Dt," Lbou Economics 8: - 4. Cume, Michel nd Noh Stefnec "Woke Qulity nd Lbo Mket Soting," Economics Lettes 96: 0 8. Dohmen, Thoms nd Amin Flk "Pefomnce Py nd Multi-Dimensionl Soting: Poductivity, Pefeences nd Gende," IZA Discussion Ppe No. 001, Bonn. Dohmen, Thoms, Amin Flk, Dvid Huffmn, Uwe Sunde, Jügen Schupp nd Get G. Wgne Individul Risk Attitudes: New Evidence fom Lge, Repesenttive, Expeimentlly-Vlidted Suvey. IZA Discussion Ppe No. 1730, Bonn. Dgo, Robet, Sul Estin nd Mk Wooden "Py fo Pefomnce Incentives nd Wok Attitudes," Austlin Jounl of Mngement 17: Fishe, Anne "Ae You Redy to Tlk Money?" Fotune Septembe 6, 004. Foste, J.E. nd H.Y. Wn Involunty Unemployment s Pincipl-Agent 35