The effect of pay-for-performance contracts on wages

I investigate the role played by learning and self-selection according to comparative advantage in the often reported result that piece rate workers (including commissions) earn more on average compared to other workers. With comparative advantage, the returns to skills differ across pay methods. I find that comparative advantage along with learning about worker skills seem to play a role for workers who are either at an early stage in their career or who are observed for the first time in a given job-match. For older workers, the return to skills is basically the same across pay methods.