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Performance pay and productivity of low- and high-ability workers

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  • Franceschelli, Ignacio
  • Galiani, Sebastian
  • Gulmez, Eduardo

Abstract

Existing literature has mainly focused on analyses of the overall effect of a change in the incentive scheme. Lazear (Lazear, E., 2000, "Performance pay and productivity", American Economic Review, 90, 1346-1361.), for example, estimates the average increase in productivity after a firm switches from an hourly-wage scheme to a piece-rate plus basic-wage scheme. His paper does not, however, account for the fact that many workers remained within the basic-wage range after the change was made in the incentive scheme. In the present paper we explore how the incentive effect might have been different for those workers seeking the basic wage, and those workers seeking the piece-rate component of the wage. Interestingly, the change in productivity is approximately the same in percentage terms for both types of workers.

Suggested Citation

  • Franceschelli, Ignacio & Galiani, Sebastian & Gulmez, Eduardo, 2010. "Performance pay and productivity of low- and high-ability workers," Labour Economics, Elsevier, vol. 17(2), pages 317-322, April.
    • Handle: RePEc:eee:labeco:v:17:y:2010:i:2:p:317-322
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    References listed on IDEAS

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    Cited by:

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    3. Frederiksen, Anders & Hansen, Daniel Baltzer Schjødt & Flaherty Manchester, Colleen, 2022. "Does Group-Based Incentive Pay Lead To Higher Productivity? Evidence from a Complex and Interdependent Industrial Production Process," IZA Discussion Papers 14986, Institute of Labor Economics (IZA).
    4. Christian Pfeifer, 2014. "Base Salaries, Bonus Payments, and Work Absence among Managers in a German Company," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(5), pages 523-536, November.
    5. Mills, Brian M., 2017. "Technological innovations in monitoring and evaluation: Evidence of performance impacts among Major League Baseball umpires," Labour Economics, Elsevier, vol. 46(C), pages 189-199.
    6. Masclet, David & Peterle, Emmanuel & Larribeau, Sophie, 2015. "Gender differences in tournament and flat-wage schemes: An experimental study," Journal of Economic Psychology, Elsevier, vol. 47(C), pages 103-115.
    7. Chi, Wei & Liu, Tracy Xiao & Qian, Xiaoye & Ye, Qing, 2019. "An experimental study of incentive contracts for short- and long-term employees," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 366-383.
    8. Gary Charness & David Masclet & Marie Claire Villeval, 2014. "The Dark Side of Competition for Status (preprint)," Working Papers halshs-01090241, HAL.
    9. Maurice J. G. Bun & Leo C. E. Huberts, 2018. "The Impact of Higher Fixed Pay and Lower Bonuses on Productivity," Journal of Labor Research, Springer, vol. 39(1), pages 1-21, March.

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