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 unionised 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. At the firm level, the results generally confirm predictions from theory that productivity returns to centives are non-linear and concave in shape and that the effectiveness of incentives is decreasing in group size. I argue that the latter is most likely due to the lessening of the free-rider problem and the increased effectiveness of peer/mutual monitoring associated with smaller groups. The results also point to a negative relationship between the level of incentives and employment over time.
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Bibliographic InfoPaper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 03-14.
Length: 26 pages
Date of creation: 17 Jan 2003
Date of revision:
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Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
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More information through EDIRC
Group Incentives; Compensation; Free Riding; Peer Monitoring; Trade Unions; India;
Other versions of this item:
- Debashish Bhattacherjee, 2005. "The Effects of Group Incentives in an Indian Firm: Evidence from Payroll Data," LABOUR, CEIS, vol. 19(1), pages 147-173, 03.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- 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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