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A General Test for Distortions in Performance Measures

Pascal Courty¹; Gerald Marschke^2,3

¹ European University Institute · ² Albany State University · ³ University at Albany, State University of New York

Results from the incentive literature suggest that performance measures are often distorted, eliciting dysfunctional and unintended responses. The existence of these responses, however, is difficult to demonstrate in practice because this behavior is typically hidden from the researcher. We present a simple model showing that one can test for the existence of distortions by estimating the change in the association between a performance measure and the true goal of the organization with the measure's introduction. Using data from a public-sector organization, we find evidence consistent with the existence of distortions. We draw implications for the selection of performance measures.

DOI

10.1162/rest.90.3.428

Volume

90 (3)

Pages

428-441

Language

en

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