The Effects of Group Incentives in an Indian Firm: Evidence from Payroll Data
AbstractThis paper estimates the effects of group incentives on productivity, pay and employment in a large unionized firm in India. Using plant-level monthly time-series data from the payroll office for the period 1985-95, and controlling for both (plant) fixed effects and (contract) time effects, the paper provides econometric evidence on the effectiveness of both the level and intensity of incentive pay on the outcome measures. In addition, the relative performance of two types of group incentives defined on the basis of group size is also analysed. The results generally confirm predictions from theory that productivity returns to incentives are non-linear and concave in shape and that the effectiveness of incentives is decreasing in group size. It is argued that the latter is most likely due to the lessening of the free-rider problem and the increased effectiveness of peer monitoring associated with smaller groups. The results also point to a negative relationship between the level of incentives and employment over time. Copyright 2005 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by CEIS in its journal LABOUR.
Volume (Year): 19 (2005)
Issue (Month): 1 (03)
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Other versions of this item:
- Bhattacherjee, Debashish, 2003. "The Effects of Group Incentives in an Indian Firm - Evidence from Payroll Data," Working Papers 03-14, University of Aarhus, Aarhus School of Business, Department of Economics.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
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