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Performance Pay, Training and Labor Mobility

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Author Info
Anne C. Gielen () (Tilburg University, CentER, Institute for Labor Studies (OSA) and IZA)

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Abstract

Market imperfections may cause firms and workers to under-invest in specific training. This paper shows that profit sharing may be a suitable instrument to enhance specific training investments, either by enhancing wage flexibility or by increasing the returns to training. As a result, profit sharing not only increases productivity by means of an effort effect, but also by increased training investments. Furthermore, the results suggest that older workers' employability can be improved if a profit-related remuneration is paid.

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File URL: ftp://repec.iza.org/RePEc/Discussionpaper/dp2932.pdf
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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2932.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 30 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2932

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Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
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Related research
Keywords: profit-related pay; training; labor productivity; labor mobility;

Other versions of this item:

Find related papers by JEL classification:
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
M53 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Training
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion

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References listed on IDEAS
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  1. Anne C. Gielen & Marcel J.M. Kerkhofs & Jan C. van Ours, 2006. "Performance Related Pay and Labor Productivity," IZA Discussion Papers 2211, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Anne C. Gielen & Jan C. van Ours, 2006. "Why Do Worker-Firm Matches Dissolve?," IZA Discussion Papers 2165, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Benoit Dostie, 2006. "Wages, Productivity and Aging," Cahiers de recherche 0645, CIRPEE. [Downloadable!]
    Other versions:
  4. Lynch, Lisa M, 1992. "Private-Sector Training and the Earnings of Young Workers," American Economic Review, American Economic Association, vol. 82(1), pages 299-312, March.
  5. Loewenstein, Mark A & Spletzer, James R, 1998. "Dividing the Costs and Returns to General Training," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 142-71, January. [Downloadable!] (restricted)
  6. Wiji Arulampalam & Alison L. Booth & Mark L. Bryan, 2004. "Training in Europe," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 346-360, 04/05. [Downloadable!] (restricted)
    Other versions:
  7. Ewing, Bradley T., 1996. "Wages and performance-based pay: Evidence from the NLSY," Economics Letters, Elsevier, vol. 51(2), pages 241-246, May. [Downloadable!] (restricted)
  8. Edwin Leuven, 2005. "The Economics of Private Sector Training: A Survey of the Literature," Journal of Economic Surveys, Blackwell Publishing, vol. 19(1), pages 91-111, 02. [Downloadable!] (restricted)
  9. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-62, October. [Downloadable!] (restricted)
  10. Omar Azfar & Stephan Danninger, 2001. "Profit sharing, employment stability, and wage growth," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 54(3), pages 619-630, April.
  11. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier. [Downloadable!] (restricted)
  12. Gielen, Anne C. & van Ours, Jan C., 2006. "Age-specific cyclical effects in job reallocation and labor mobility," Labour Economics, Elsevier, vol. 13(4), pages 493-504, August. [Downloadable!] (restricted)
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  13. G. S. Maddala & Lung-Fei Lee, 1976. "Recursive Models with Qualitative Endogenous Variables," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 168-188 National Bureau of Economic Research, Inc. [Downloadable!]
  14. Daron Acemoglu & Jorn-Steffen Pischke, 1998. "Beyond Becker: Training in Imperfect Labor Markets," NBER Working Papers 6740, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Alison L. Booth & Mark L. Bryan, 2005. "Testing Some Predictions of Human Capital Theory: New Training Evidence from Britain," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 391-394, 06. [Downloadable!] (restricted)
  16. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March. [Downloadable!] (restricted)
  17. Daniel Parent, 2002. "Incentives? The Effect of Profit Sharing Plans Offered by Previous Employers on Current Wages," CIRANO Working Papers 2002s-54, CIRANO. [Downloadable!]
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  18. Acemoglu, D. & Pischki, J.S., 1996. "Why Do Firms Train? Theory and Evidence," Working papers 96-7, Massachusetts Institute of Technology (MIT), Department of Economics.
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  19. Lorraine Dearden & Howard Reed & John Van Reenen, 2006. "The Impact of Training on Productivity and Wages: Evidence from British Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(4), pages 397-421, 08. [Downloadable!] (restricted)
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  20. Booth, A-L & Frank, J, 1997. "Performance Related Pay," CEPR Discussion Papers 364, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University.
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  21. Booth, Alison L & Frank, Jeff, 1999. "Earnings, Productivity, and Performance-Related Pay," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 447-63, July. [Downloadable!] (restricted)
  22. Cahuc, Pierre & Dormont, Brigitte, 1997. "Profit-sharing: Does it increase productivity and employment? A theoretical model and empirical evidence on French micro data," Labour Economics, Elsevier, vol. 4(3), pages 293-319, September. [Downloadable!] (restricted)
    Other versions:
  23. Christina Gathmann & Uta Schönberg, 2006. "How General Is Specific Human Capital?," IZA Discussion Papers 2485, Institute for the Study of Labor (IZA). [Downloadable!]
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