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Performance-Related Pay and Firm Productivity

Author

Listed:
  • Claudio Lucifora
  • Federica Origo

    (Claudio Lucifora is Full Professor of Economics at the Università Cattolica del Sacro Cuore di Milano and an IZA Research Fellow. Federica Origo is Associate Professor of Economics at the Università degli Studi di Bergamo.)

Abstract

The authors investigate the causal effect on firm productivity of a switch from fixed wages to collective performance-related pay, exploiting a reform in the structure of collective bargaining triggered by a social pact. They find that an increase in the adoption of collective performance-related pay leads to a 3 to 5% productivity gain but that such effect declines over time. They show that the effect on productivity varies substantially by firm size, industry affiliation, and union density. Both the size of the bonus and the design of the scheme—in terms of number and types of parameters used—are also important features for a firm’s productivity.

Suggested Citation

  • Claudio Lucifora & Federica Origo, 2015. "Performance-Related Pay and Firm Productivity," ILR Review, Cornell University, ILR School, vol. 68(3), pages 606-632, May.
    • Handle: RePEc:sae:ilrrev:v:68:y:2015:i:3:p:606-632
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    Citations

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    Cited by:

    1. Riccardo Leoni, 2018. "Efficienza ed efficacia della contrattazione integrativa aziendale. Una rassegna della letteratura empirica italiana," Economia & lavoro, Carocci editore, issue 1, pages 131-170.
    2. Hristos Doucouliagos & Patrice Laroche & Douglas L. Kruse & T. D. Stanley, 2020. "Is Profit Sharing Productive? A Meta‐Regression Analysis," British Journal of Industrial Relations, London School of Economics, vol. 58(2), pages 364-395, June.
    3. Ricardo Pagan & Miguel Ángel Malo, 2021. "Performance Appraisal and Job Satisfaction for Workers Without and With Disabilities by Gender," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 153(3), pages 1011-1039, February.
    4. Adamopoulou, Effrosyni & Villanueva, Ernesto, 2020. "Wage Determination and the Bite of Collective Contracts in Italy and Spain: Evidence from the Metalworking Industry," IZA Discussion Papers 13542, Institute of Labor Economics (IZA).
    5. Jirjahn, Uwe & Mohrenweiser, Jens, 2023. "Variable Payment Schemes and Productivity: Do Individual-Based Schemes Really Have a Stronger Influence than Collective Ones?," IZA Discussion Papers 16267, Institute of Labor Economics (IZA).
    6. Claudio Lucifora, 2015. "Performance-related pay and labor productivity," IZA World of Labor, Institute of Labor Economics (IZA), pages 152-152, May.
    7. Akwasi Ampofo & Firmin Doko Tchatoka, 2019. "Reducing Public‐Private Sector Pay Differentials: The Single Spine Pay Policy As A Natural Experiment In Ghana," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 283-315, January.
    8. Biancardi, Daniele & Lucifora, Claudio & Origo, Federica, 2022. "Short-time work and unionization," Labour Economics, Elsevier, vol. 78(C).
    9. Andrea Garnero & François Rycx & Isabelle Terraz, 2020. "Productivity and Wage Effects of Firm‐Level Collective Agreements: Evidence from Belgian Linked Panel Data," British Journal of Industrial Relations, London School of Economics, vol. 58(4), pages 936-972, December.
    10. Stefania Cardinaleschi & Mirella Damiani & Fabrizio Pompei, 2020. "Knowledge-intensive sectors and the role of collective performance-related pay," Industry and Innovation, Taylor & Francis Journals, vol. 27(5), pages 480-512, May.
    11. 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.
    12. Devicienti, Francesco & Manello, Alessandro & Vannoni, Davide, 2017. "Technical efficiency, unions and decentralized labor contracts," European Journal of Operational Research, Elsevier, vol. 260(3), pages 1129-1141.
    13. Uwe Jirjahn, 2015. "Performance Pay and Productivity: The Moderating Role of a High-Wage Policy," Research Papers in Economics 2015-04, University of Trier, Department of Economics.
    14. Adamopoulou, Effrosyni & Villanueva, Ernesto, 2022. "Wage determination and the bite of collective contracts in Italy and Spain," Labour Economics, Elsevier, vol. 76(C).
    15. Matteo Bugamelli & Francesca Lotti & Monica Amici & Emanuela Ciapanna & Fabrizio Colonna & Francesco D�Amuri & Silvia Giacomelli & Andrea Linarello & Francesco Manaresi & Giuliana Palumbo & Filippo , 2018. "Productivity growth in Italy: a tale of a slow-motion change," Questioni di Economia e Finanza (Occasional Papers) 422, Bank of Italy, Economic Research and International Relations Area.
    16. Belloc, Filippo, 2022. "Profit sharing and innovation across organizational layers," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 598-623.

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