Tuesday, February 3, 2015

Performance Pay or Redistribution? Cultural Differences in Just-World Beliefs and Preferences for Wage Inequality

FRANK Douglas H., WERTENBROCH Klaus, MADDUX William W.
Read the working paper
INSEAD Working Paper 2015/10/MKT/OBH/ACGRE

We identify and test a specific psychological mechanism underlying cross-national differences in preferences for performance-based versus redistributive compensation systems. We posit that individuals’ beliefs in the inherent justness and deservedness of individual outcomes (i.e., just world beliefs: JWBs) can help explain individual and culture-level variation in preferences for these compensation systems. Study 1 demonstrates a general correlation between the JWBs of a culturally diverse sample of former managers and their preferences for performance versus equal pay for an individual task. Study 2 shows that American participants exhibit stronger preferences for individual performance pay versus redistributive pay than do French participants, a difference that is mediated by JWBs. Study 3 holds national culture constant and replicates these effects by experimentally manipulating JWBs, demonstrating the causal nature of JWBs in determining preferences for performance-based versus redistributive compensation systems. Implications for organizational incentive systems, culture, and work motivation are discussed.