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Measuring the output reduction due to incentive ratcheting in the field

Author

Listed:
  • Bojilov, Raicho
  • Brahm, Francisco
  • Poblete, Joaquin

Abstract

Quantitative evidence from the field on the output loss due to incentive ratcheting is mixed. One possible explanation is that the output response to ratcheting varies with the level of ratcheting. This paper estimates how the output cost of ratcheting varies with the level of ratcheting using rich data from the restructuring of the salesforce of a large Chilean producer and distributor of beverages. We show that in response to reducing ratcheting by one standard deviation, the salespersons at this firm increase sales by an average of 19%. The output response is non-linear in ratcheting: Output reduction is greatest when workers move from low or no ratcheting to some ratcheting. We execute additional analysis to verify the causal nature of our result.

Suggested Citation

  • Bojilov, Raicho & Brahm, Francisco & Poblete, Joaquin, 2026. "Measuring the output reduction due to incentive ratcheting in the field," Journal of Economic Behavior & Organization, Elsevier, vol. 242(C).
    • Handle: RePEc:eee:jeborg:v:242:y:2026:i:c:s0167268125005244
    DOI: 10.1016/j.jebo.2025.107412
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices

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