Locus of control and performance appraisal

•Our empirical analysis uses the SOEP.•Workers with an internal locus of control sort into jobs with performance appraisals.•Risk tolerant workers also sort into jobs with performance appraisals.•There is a large negative interaction of locus of control and risk tolerance.

We show that West German workers with an internal locus of control sort into jobs with performance appraisals. Appraisals provide workers who believe they control their environment a tool to demonstrate their value and achieve their goals. We confirm that workers who are risk tolerant also sort into jobs with performance appraisals but explain why the influence of the locus of control and risk tolerance should not be additive. We demonstrate this by estimating a routinely large and significantly negative interaction in our sorting equations. We also show that important patterns of sorting are revealed only when taking into account the interaction of locus of control and risk tolerance.