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Is Seniority-Based Pay Used as a Motivation Device? Evidence from Plant Level Data

Author Info

  • Alberto Bayo-Moriones
  • Jose E. Galdon-Sanchez
  • Maia Güell

Abstract

In this paper we use data from industrial plants to investigate if seniority-based pay is used asa motivational device for production workers. Alternatively, seniority-based pay could simplybe a wage setting rule not necessarily related to the provision of incentives. Unlike previouspapers, we use a direct measure of seniority-based pay as well as measures of monitoringdevices and piece-rates. We find that firms that offer seniority-based pay are less likely tooffer explicit incentives. They are also less likely to invest in monitoring devices. We alsofind that firms that offer seniority-based pay are more likely to engage in other humanresource management policies that result in long employment relationships. Overall theseresults suggest that seniority-based pay is indeed used as a motivation device.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0646.

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Date of creation: Aug 2004
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Handle: RePEc:cep:cepdps:dp0646
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Keywords: Human resource management practices; incentives; monitoring;

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Find related papers by JEL classification:
  • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
  • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
  • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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Cited by:

  1. Ando, Munetomo & Kobayashi, Hajime, 2008. "Intergenerational conflicts of interest and seniority systems in organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 757-767, March.

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