Locus of control and performance pay: Evidence from US survey data

Abstract

This work examines the influence of locus of control on sorting into performance pay jobs. It uniquely examines different types of performance pay schemes, demonstrating sharp differences between them. Bivariate probit estimates indicate workers with an internal locus of control sort into individual schemes but not joint schemes. Wage equations reveal that adding locus of control modestly reduces the return to individual performance pay but that in more complete specifications, the return to an internal locus of control becomes vanishingly small, which suggests that its primary importance is in sorting (not only into performance pay but into education and occupation).