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Incentives in the Public Sector: Evidence from a Government Agency

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  • Simon Burgess
  • Carol Propper
  • Marisa Ratto
  • Emma Tominey

Abstract

We study the impact of team‐based performance pay in a major UK government agency, the public employment service. The scheme covered quantity and quality targets, measured with varying degrees of precision. We use unique data from the agency's performance management system and personnel records, linked to local labour market data. We show that on average the scheme had no significant effect but had a substantial positive effect in small teams, fitting an explanation combining free riding and peer monitoring. The impact was greater on better‐measured quantity outcomes than quality outcomes. The scheme was very cost effective in small offices.

Suggested Citation

  • Simon Burgess & Carol Propper & Marisa Ratto & Emma Tominey, 2017. "Incentives in the Public Sector: Evidence from a Government Agency," Economic Journal, Royal Economic Society, vol. 127(605), pages 117-141, October.
    • Handle: RePEc:wly:econjl:v:127:y:2017:i:605:p:f117-f141
    DOI: 10.1111/ecoj.12422
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    More about this item

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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