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Is Seniority-Based Pay Used as a Motivation Device? Evidence from Plant Level Data

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Author Info
Alberto Bayo-Moriones
Jose E. Galdon-Sanchez
Maia Guell

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Abstract

In this paper we use data from industrial plants to investigate if seniority-based pay is used asa motivational device for production workers. Alternatively, seniority-based pay could simplybe a wage setting rule not necessarily related to the provision of incentives. Unlike previouspapers, we use a direct measure of seniority-based pay as well as measures of monitoringdevices and piece-rates. We find that firms that offer seniority-based pay are less likely tooffer explicit incentives. They are also less likely to invest in monitoring devices. We alsofind that firms that offer seniority-based pay are more likely to engage in other humanresource management policies that result in long employment relationships. Overall theseresults suggest that seniority-based pay is indeed used as a motivation device.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0646.

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Date of creation: Aug 2004
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Handle: RePEc:cep:cepdps:dp0646

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Keywords: Human resource management practices incentives monitoring

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Find related papers by JEL classification:
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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