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The Choice of Payment Schemes: Australian Establishment Data

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Author Info
Robert Drago (Univ. of Wisconsin-Milwaukee)
John S. Heywood (Univ. of Wisconsin-Milwaukee)

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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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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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J - Labor and Demographic Economics

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  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.
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  2. 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. [Downloadable!] (restricted)
  3. Belman, Dale & Heywood, John S, 1992. "Wages, Incentive Schemes, and the Role of Gender," Review of Social Economy, Taylor and Francis Journals, vol. 50(2), pages 149-62, Summer.
  4. Richard B. Freeman, 1982. "Union wage practices and wage dispersion within establishments," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 36(1), pages 3-21, October.
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  5. Charles Brown, 1990. "Firms' choice of method of pay," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 43(3), pages 165-182, February.
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  6. 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. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  8. Goldin, Claudia, 1986. "Monitoring Costs and Occupational Segregation by Sex: A Historical Analysis," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 1-27, January. [Downloadable!] (restricted)
  9. Drago, Robert, 1991. "Incentives, Pay, and Performance: A Study of Australian Employees," Applied Economics, Taylor and Francis Journals, vol. 23(9), pages 1433-46, September.
  10. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. 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. [Downloadable!] (restricted)
  12. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December. [Downloadable!] (restricted)
  13. John Pencavel, 1975. "Work Effort On-the-Job Screening, and Alternative Methods of Remuneration," Working Papers 443, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. McCausland, David & Pouliakas, Konstantinos & Theodossiou, Ioannis, 2005. "Some are Punished and Some are Rewarded: A Study of the Impact of Performance Pay on Job Satisfaction," MPRA Paper 14243, University Library of Munich, Germany. [Downloadable!]
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  2. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December. [Downloadable!] (restricted)
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  3. Cowling, Marc, 2007. "Performance Related Pay Coverage in the UK," MPRA Paper 1619, University Library of Munich, Germany. [Downloadable!]
  4. John S Heywood & Colin Green, 2007. "Performance pay, sorting and the dimensions of job satisfaction," Working Papers 004731, Lancaster University Management School, Economics Department. [Downloadable!]
  5. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," NBER Working Papers 13653, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2009. "Rewarding Carrots & Crippling Sticks: Eliciting Employee Preferences for the Optimal Incentive Mix in Europe," MPRA Paper 14167, University Library of Munich, Germany. [Downloadable!]
  7. Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," The Centre for Market and Public Organisation 03/071, Department of Economics, University of Bristol, UK. [Downloadable!]
  8. Sue Fernie & David Metcalf, 1998. "(Not)Hanging on the Telephone: Payment systems in the New Sweatshops," CEP Discussion Papers dp0390, Centre for Economic Performance, LSE. [Downloadable!]
  9. Felipe Balmaceda, . "Compensation Methods in Competitive Labor Markert," ILADES-Georgetown University Working Papers inv118, Ilades-Georgetown University, School of Economics and Bussines. [Downloadable!]
  10. Felipe Balmaceda, 2002. "Compensation Methods in a Competitive Labor Market: the Role of Asymmetric Information," Documentos de Trabajo 139, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
  11. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2009. "Confronting Objections to Performance Pay: A Study of the Impact of Individual and Gain-sharing Incentives on the Job Satisfaction of British Employees," MPRA Paper 14244, University Library of Munich, Germany. [Downloadable!]
  12. Oyer, Paul, 2001. "Why Do Firms Use Incentives That Have No Incentive Effects?," Research Papers 1686, Stanford University, Graduate School of Business. [Downloadable!]
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