Bandiera, Oriana 
ORCID: 0009-0002-6817-793X, Barankay, Iwan and Rasul, Imran
(2004)
Relative and absolute incentives: evidence on worker productivity.
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Centre for Economic Policy Research (Great Britain), London, UK.
Abstract
We use personnel data to compare worker productivity under a relative incentive scheme, where worker pay is negatively related to the average productivity of co-workers, with productivity under piece rates – where pay is based on individual productivity alone. We find that for the average worker, productivity is at least 50% higher under piece rates. We show this is because workers partially internalize the negative externality they impose on others under the relative incentive scheme and do so to a greater extent when they work alongside their close friends. The results illustrate the importance of understanding how workers behave in the presence of externalities when designing incentive schemes.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | http://www.cepr.org |
| Additional Information: | © 2004 Oriana Bandiera, Iwan Barankay and Imran Rasul |
| Divisions: | Economics STICERD |
| Subjects: | H Social Sciences > HD Industries. Land use. Labor |
| JEL classification: | J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages; Payment Methods M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics > M52 - Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs, seniority issues) |
| Date Deposited: | 05 Jun 2008 09:31 |
| Last Modified: | 01 Nov 2024 04:51 |
| URI: | http://eprints.lse.ac.uk/id/eprint/5384 |
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