Performance Related Pay and Firm Productivity: New Evidence from a Quasi-Natural Experiment in Italy
AbstractThis paper investigates the causal effect of a switch from fixed wages to collective performance-related pay on firm productivity, exploiting an exogenous variation in the institutional environment regulating collective bargaining. We find that the introduction of collective performance related pay significantly increases productivity by around 3-5 per cent, but such effect varies greatly by firm size, industry and union density. We show that the design of the PRP scheme – in terms of number and type of parameters used – is also relevant for firm productivity.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6483.
Length: 29 pages
Date of creation: Apr 2012
Date of revision:
Publication status: forthcoming as “Performance-Related Pay and Firm Productivity: Evidence from a Reform in the Structure of Collective Bargaining” in: Industrial and Labor Relations Review, 2014
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Find related papers by JEL classification:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
- L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-02 (All new papers)
- NEP-EFF-2012-05-02 (Efficiency & Productivity)
- NEP-EUR-2012-05-02 (Microeconomic European Issues)
- NEP-HRM-2012-05-02 (Human Capital & Human Resource Management)
- NEP-LAB-2012-05-02 (Labour Economics)
- NEP-LMA-2012-05-02 (Labor Markets - Supply, Demand, & Wages)
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