Pros and Cons of Performance Pay

Does paying workers for good performance crowd-out their non-monetary motivations to do a good job? A large body of literature in psychology shows that this may indeed be the case, but most of the evidence comes from laboratory experiments. In a recent study, David Huffman implemented the classic experimental design from psychology in a real work setting. His findings support the view that performance pay may have psychological effects, but challenge the view that these are uniformly negative. The heterogeneity is systematically related to worker personality types and social preferences.

David Huffman's research lies at the intersection of labour economics and behavioural economics. He studies central questions in labour economics, such as the causes of involuntary unemployment, and the response of worker labour supply to financial incentives. This research is informed by insights from behavioural economics, for example the potential for workers to be influenced by fairness concerns, or time preferences that are hyperbolic.

During his stay at CES, Mr Huffman will offer a lecture series on inter-temporal choice from a behavioural economics perspective, covering non-standard models such as the hyperbolic discounting model and various applications.

Mr Huffman's research has been published in various scholarly journals, including the American Economic Review, American Economic Journal: Microeconomics, Journal of the European Economic Association, Management Science, Review of Economic Studies, and the Review of Economics and Statistics.

David Huffman is Associate Professor of Economics at the University of Oxford as well as Tutorial Fellow at St. Catherine's College, Oxford. He is also Affiliated Faculty Member at the Center for Health, Incentives, and Behavioral Economics (CHIBE), University of Pennsylvania and IZA Research Fellow. He currently serves as Associate Editor for Management Science. He has held visiting positions at the University of Zurich, the University of Pittsburgh and the Wharton School of Business. Mr Huffman graduated from Oberlin College in 1996. In August, 2003 he completed his PhD in Economics at the University of California, Berkeley.