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Incentive Pay and Performance: Insider Econometrics in a Multi-Unit Firm

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  • Bogaard, Hein

    (George Washington University)

  • Svejnar, Jan

    (Columbia University)

Abstract

We exploit organizational reforms in a foreign-owned bank in Central-East Europe to study the implementation of modern HRM policies in an emerging market context. We have branch-level data and use our knowledge of the process that led to the adoption of the reforms to implement two estimators that address endogeneity bias in a complementary fashion: an IV approach and Generalized Propensity Score estimation. Our results show that some of the reforms had a positive impact on productivity, but they also underscore the risks of quantity-based incentives where quality is important.

Suggested Citation

  • Bogaard, Hein & Svejnar, Jan, 2013. "Incentive Pay and Performance: Insider Econometrics in a Multi-Unit Firm," IZA Discussion Papers 7800, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7800
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    More about this item

    Keywords

    insider econometrics; endogeneity of HRM policies; incentives; foreign ownership; banking; Central and Eastern Europe;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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