Leisure time, performance pay, and crowding-out

• Published in: Economics letters Vol. 231; p. 111266
• Main Author: Vogelsang, Timo
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.10.2023
• Subjects: Crowding-out; economics; Laboratory experiment; laboratory experimentation; Non-monetary reward; Performance pay; questionnaires; Time-off; M 52; J 33; Time-off; Performance pay; C 91; Non-monetary reward; Laboratory experiment; Crowding-out
• ISSN: 0165-1765; 1873-7374
• DOI: 10.1016/j.econlet.2023.111266

I study the performance effect of removing performance pay across various incentive domains. Subjects in the laboratory experiment receive performance pay in either the monetary or time domain during the first working period, after which the incentive is removed in the second working period. Removing performance pay decreases performance in all treatments compared to a baseline of no bonus. However, this effect is less pronounced in the time domain, where participants receive a time-off bonus that allows them to leave the laboratory earlier depending on their performance. A post-experimental questionnaire suggests reduced enjoyment of the task as a possible driver. •Performance pay crowds-out long run performance after removing the incentive.•A time-off bonus reduces this crowding-out effect.•A change in the enjoyment of the task is a potential driver of the crowding-out effect.