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How performance related pay affects productivity and employment

Author

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  • Anne Gielen

    ()

  • Marcel Kerkhofs
  • Jan Ours

Abstract

This paper uses information from a panel of Dutch firms to investigate the labor productivity effects of performance related pay (PRP). We find that PRP increases productivity at the firm level with 9% and employment growth with 5%.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Anne Gielen & Marcel Kerkhofs & Jan Ours, 2010. "How performance related pay affects productivity and employment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(1), pages 291-301, January.
  • Handle: RePEc:spr:jopoec:v:23:y:2010:i:1:p:291-301
    DOI: 10.1007/s00148-009-0252-9
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    File URL: http://hdl.handle.net/10.1007/s00148-009-0252-9
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    References listed on IDEAS

    as
    1. Paarsch, Harry J & Shearer, Bruce, 2000. "Piece Rates, Fixed Wages, and Incentive Effects: Statistical Evidence from Payroll Records," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 59-92, February.
    2. Ewing, Bradley T., 1996. "Wages and performance-based pay: Evidence from the NLSY," Economics Letters, Elsevier, vol. 51(2), pages 241-246, May.
    3. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    4. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-431, July.
    5. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Keith Bender & Colin Green & John Heywood, 2012. "Piece rates and workplace injury: Does survey evidence support Adam Smith?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 569-590, January.
    2. Kato, Takao & Kauhanen, Antti, 2013. "Performance Pay and Enterprise Productivity: The Details Matter," ETLA Working Papers 21, The Research Institute of the Finnish Economy.
    3. repec:zbw:hohpro:348 is not listed on IDEAS
    4. Keith A. Bender & Alex Bryson, 2013. "Performance Pay: Trends and Consequences Introduction," National Institute Economic Review, National Institute of Economic and Social Research, vol. 226(1), pages 1-3, November.
    5. Michele Battisti & Giovanna Vallanti, 2011. "Flexible Wage Contracts, Temporary Jobs and Worker Performance: Evidence from Italian Firms," Working Papers CELEG 1105, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    6. 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.
    7. Mirella Damiani & Fabrizio Pompei & Andrea Ricci, 2016. "Performance related pay, productivity and wages in Italy: a quantile regression approach," International Journal of Manpower, Emerald Group Publishing, vol. 37(2), pages 344-371, May.
    8. repec:zbw:hkjalm:175336 is not listed on IDEAS
    9. repec:old:wpaper:348 is not listed on IDEAS
    10. Phong Nguyen & Chuong Dang & Lam Nguyen, 2015. "Would Better Earning, Work Environment, and Promotion Opportunities Increase Employee Performance? An Investigation in State and Other Sectors in Vietnam," Public Organization Review, Springer, vol. 15(4), pages 565-579, December.
    11. Simen Markussen, 2012. "The individual cost of sick leave," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(4), pages 1287-1306, October.
    12. Konstantinos Pouliakas & Nikolaos Theodoropoulos, 2012. "The Effect of Variable Pay Schemes on Workplace Absenteeism," Research in Labor Economics,in: Research in Labor Economics, volume 36, pages 109-157 Emerald Publishing Ltd.
    13. Rinawi, Miriam & Backes-Gellner, Uschi, 2013. "Should I stay or should I go? - The Effect of Performance Pay on the Retention of Apprenticeship Graduates," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80024, Verein für Socialpolitik / German Economic Association.
    14. Mirella Damiani & Fabrizio Pompei & Andrea Ricci, 2013. "Wages and Labour Productivity: the role of performance-related pay in Italian firms," Quaderni del Dipartimento di Economia, Finanza e Statistica 124/2013, Università di Perugia, Dipartimento Economia.
    15. Domenico Buccella, 2016. "Profit sharing as entry deterrence mechanism," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(1), pages 17-31, April.
    16. Carsten Helm & Dominique Demougin, 2012. "Incentive Contracts and Efficient Unemployment Benefits in a Globalized World," Working Papers V-348-12, University of Oldenburg, Department of Economics, revised Aug 2012.
    17. Claudio Lucifora, 2015. "Performance-related pay and labor productivity," IZA World of Labor, Institute for the Study of Labor (IZA), pages 152-152, May.
    18. Maurice J.G. Bun & Leo Huberts, 2016. "The impact of performance pay on sales and fundraising," UvA-Econometrics Working Papers 16-01, Universiteit van Amsterdam, Dept. of Econometrics.
    19. Papps, Kerry L., 2010. "Productivity under Large Pay Increases: Evidence from Professional Baseball," IZA Discussion Papers 5133, Institute for the Study of Labor (IZA).
    20. Michele Battisti & Giovanna Vallanti, 2013. "Flexible Wage Contracts, Temporary Jobs, and Firm Performance: Evidence From Italian Firms," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 52(3), pages 737-764, July.

    More about this item

    Keywords

    Performance related pay; Labor productivity; C41; H55; J64; J65;

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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