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Incentives and Worker Behavior: Some Evidence

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  • Andrew Weiss

Abstract

This paper is concerned with three types of incentive programs. First, individual wage incentives that cause a worker's efforts to have a major effect on his pay. Second, group incentives in which the pay of an individual is determined by the output of a group of workers-a group can be as small as a four member work team or as large as the whole firm. Finally, seniority based payment schemes in which the pay of a worker rises rapidly with his tenure with the firm. We show that these payment schemes have the effects in practice that we would predict from optimizing behavior by workers. We find that group incentives tend to compress the productivity distribution of workers. This is because the relative performance of the most productive workers tends to fall, and the most and least productive workers have relatively high quit rates when workers are paid on group incentives. We also present evidence that suggests that the low quit rates in large Japanese firms may be due to steep wage-tenure profiles in those firms.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2194.

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Date of creation: Mar 1987
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Publication status: published as Cooperation, Incetntives and Risk Sharing; ed. Haig Nalbantian; Rowman and Littlefield publishers, 1987
Handle: RePEc:nbr:nberwo:2194

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Cited by:
  1. Levine, David I., 1991. "Cohesiveness, productivity, and wage dispersion," Journal of Economic Behavior & Organization, Elsevier, vol. 15(2), pages 237-255, March.
  2. Pablo González, 2002. "Profit Sharing Reconsidered: Efficiency Wages and Renegotiation Costs," Documentos de Trabajo, Centro de Economía Aplicada, Universidad de Chile 151, Centro de Economía Aplicada, Universidad de Chile.
  3. Joshua Herries & Daniel I. Rees & Jeffrey S. Zax, 2003. "Interdependence in worker productivity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 18(5), pages 585-604.
  4. Abramitzky, Ran, 2009. "The effect of redistribution on migration: Evidence from the Israeli kibbutz," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 498-511, April.

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