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Incentives and Worker Behavior: Some Evidence

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  • Andrew Weiss

Abstract

This paper is concerned with three types of incentive programs. First, individual wage incentives that cause a worker's efforts to have a major effect on his pay. Second, group incentives in which the pay of an individual is determined by the output of a group of workers-a group can be as small as a four member work team or as large as the whole firm. Finally, seniority based payment schemes in which the pay of a worker rises rapidly with his tenure with the firm. We show that these payment schemes have the effects in practice that we would predict from optimizing behavior by workers. We find that group incentives tend to compress the productivity distribution of workers. This is because the relative performance of the most productive workers tends to fall, and the most and least productive workers have relatively high quit rates when workers are paid on group incentives. We also present evidence that suggests that the low quit rates in large Japanese firms may be due to steep wage-tenure profiles in those firms.

Suggested Citation

  • Andrew Weiss, 1987. "Incentives and Worker Behavior: Some Evidence," NBER Working Papers 2194, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2194
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    1. repec:bla:econom:v:84:y:2017:i:335:p:498-515 is not listed on IDEAS
    2. repec:eee:labeco:v:46:y:2017:i:c:p:110-117 is not listed on IDEAS
    3. Joshua Herries & Daniel I. Rees & Jeffrey S. Zax, 2003. "Interdependence in worker productivity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 585-604.
    4. Panos, Georgios A. & Theodossiou, Ioannis, 2010. "Unionism and Peer-Referencing," SIRE Discussion Papers 2010-122, Scottish Institute for Research in Economics (SIRE).
    5. Levine, David I., 1991. "Cohesiveness, productivity, and wage dispersion," Journal of Economic Behavior & Organization, Elsevier, vol. 15(2), pages 237-255, March.
    6. Cardella, Eric & Depew, Briggs, 2016. "Testing for the Ratchet Effect: Evidence from a Real-Effort Work Task," IZA Discussion Papers 9981, Institute for the Study of Labor (IZA).
    7. Dal Forno, Arianna & Merlone, Ugo, 2010. "Incentives and individual motivation in supervised work groups," European Journal of Operational Research, Elsevier, vol. 207(2), pages 878-885, December.
    8. Pablo González, 2002. "Profit Sharing Reconsidered: Efficiency Wages and Renegotiation Costs," Documentos de Trabajo 151, Centro de Economía Aplicada, Universidad de Chile.
    9. Abramitzky, Ran, 2009. "The effect of redistribution on migration: Evidence from the Israeli kibbutz," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 498-511, April.
    10. repec:eee:gamebe:v:107:y:2018:i:c:p:182-202 is not listed on IDEAS

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