2013
DOI: 10.1111/1475-4932.12020
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Does Performance‐Based Compensation Boost Economic Growth or Lead to More Income Inequality?

Abstract: Recent observations suggest that as performance-related pay has been increasingly used, (i) compensation has grown with labour productivity, and (ii) there has been a rise in income inequality. This study is a theoretical attempt to provide a convincing explanation of these observations. We develop an endogenous growth framework comprising a profit/revenue-sharing scheme that simultaneously governs income inequality and economic growth. Therefore, we show that a share-based scheme can cause the workers to enga… Show more

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