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Performance pay and ethnic earnings differences in Britain

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<mark>Journal publication date</mark>07/2014
<mark>Journal</mark>Oxford Economic Papers
Issue number3
Volume66
Number of pages26
Pages (from-to)798-823
Publication StatusPublished
Early online date5/11/13
<mark>Original language</mark>English

Abstract

In the first British study, we show that the ethnic earnings gap amongst performance pay jobs is smaller than that amongst time rate jobs. This partially reflects sorting but persists with diminished magnitude in fixed effect estimates. Although varying somewhat with specification, quantile decompositions show that the smaller ethnic earnings gap is driven by bonus payments in the upper middle portion of the earnings distribution. These findings differ dramatically from those for the USA in which performance pay has been associated with larger negative racial differentials especially at the top of the earnings distribution.