Factors behind performance-related pay: evidence from Italy
This paper examines the main determinants of the adoption of performance-related pay (PRP) in Italy. The analysis is performed by merging cross-sectional information on the spread of PRP collected for 2005 by the ISFOL survey with balance sheet data, provided by the AIDA database for a panel of firms, sampled between 2002 and 2005. By performing the cross-sectional analysis for 2005 we find the following results. Firstly, in relation to company characteristics, the probability of adoption of PRP depends on firms’ past performance in terms of value added, but not on capital accumulation and innovation activity. Secondly, in relation to workers’ characteristics, the adoption of PRP increases with the proportion of trained workforce, and with that of employees with fixed-term contracts, whereas it decreases with the female share of the workforce. Lastly, the presence of unions at establishment level and strike activities have positive impacts on the probability of the adoption of PRP.
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