Compensation Policy and Worker Performance: Identifying Incentive Effects from Field Experiments

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Compensation Policy and Worker Performance: Identifying Incentive Effects from Field Experiments

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Bruce S. Shearer ()

Abstract

The role of field experiments in evaluating the effect of compensation policies on worker productivity is considered. Particular attention is paid to the ability of a field experiment to identify the effect of a permanent change in firm policy. While field experiments solve endogeneity problems through randomization, they do so within a specific, and at times artificial, environment that may not be replicated by a permanent policy change. As such, rather than providing a basis for the unrestricted identification of incentive effects, experiments are better thought of as providing exogenous variation with which to identify structural parameters. These parameters can, in turn, be used to predict the effects of policy changes.

L'utilité des expériences sur le terrain afin d'évaluer l'effet de différents systèmes de compensation sur la productivité des travailleurs est investiguée. Une attention particulière est portée à la capacité des expériences d'identifier l'effet d'un changement permanent de la politique de l'entreprise. Bien que les expériences résolvent le problème d'endogénéité en permettant aux sujets d'être alloués à un système de compensation par un processus aléatoire, ceci est accompli dans un environnement spécifique et, à la fois, artificiel, qui ne saurait être répliqué par un changement permanent. Comme tel, plutôt que d'identifier l'effet incitatif sans restriction, les expériences nous fournissent la variation exogène qui permet d'identifier des paramètres structurels. Ces paramètres nous permettent d'évaluer les effets des changements de politiques de l'entreprise.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2003s-45.

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Date of creation: 01 Aug 2003
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Handle: RePEc:cir:cirwor:2003s-45

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Find related papers by JEL classification:
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
C9 - Mathematical and Quantitative Methods - - Design of Experiments

This paper has been announced in the following NEP Reports:

NEP-ALL-2003-09-08 (All new papers)
NEP-EXP-2003-09-08 (Experimental Economics)
NEP-LAB-2003-09-08 (Labour Economics)

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