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The Choice of Payment Schemes: Australian Establishment Data

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  • Robert Drago

    (Univ. of Wisconsin-Milwaukee)

  • John S. Heywood

    (Univ. of Wisconsin-Milwaukee)

Abstract

This paper estimates the determinants of incentive schemes. Using Australian data, we analyze a relatively large variety of incentive systems (i.e., individual piece rates, workgroup performance bonuses, workplace level systems and profit sharing) using both the new economics of personnel and the literature on strategic choice to generate hypotheses. We find that monitoring issues, job security, product market competition, and the industrial relations climate rank among the most crucial determinants of incentive use, though this pattern varies across incentive schemes.

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Bibliographic Info

Paper provided by EconWPA in its series Labor and Demography with number 9402001.

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Date of creation: 02 Feb 1994
Date of revision: 04 Feb 1994
Handle: RePEc:wpa:wuwpla:9402001

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  1. Gregg, P. A & Machin, S. j, 1987. "Unions and the Incidence of Performance Linked Pay Schemes in Britain," The Warwick Economics Research Paper Series (TWERPS) 286, University of Warwick, Department of Economics.
  2. Charles Brown, 1990. "Firms' Choice of Method of Pay," NBER Working Papers 3065, National Bureau of Economic Research, Inc.
  3. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  4. Garen, John E, 1985. "Worker Heterogeneity, Job Screening, and Firm Size," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 715-39, August.
  5. Goldin, Claudia, 1986. "Monitoring Costs and Occupational Segregation by Sex: A Historical Analysis," Scholarly Articles 2666727, Harvard University Department of Economics.
  6. Richard B. Freeman, 1982. "Union wage practices and wage dispersion within establishments," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 36(1), pages 3-21, October.
  7. Dale Belman & John Heywood, 1988. "Incentive schemes and racial wage discrimination," The Review of Black Political Economy, Springer, vol. 17(1), pages 47-56, June.
  8. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  10. Seiler, Eric, 1984. "Piece Rate vs. Time Rate: The Effect of Incentives on Earnings," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 363-76, August.
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