Bandiera, Oriana, Barankay, Iwan and Rasul, Imran (2004) Relative and absolute incentives: evidence on worker productivity. 4431. Centre for Economic Policy Research, London, UK.Full text not available from this repository.
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)|
|Additional Information:||© 2004 Oriana Bandiera, Iwan Barankay and Imran Rasul|
|Library of Congress subject classification:||H Social Sciences > HD Industries. Land use. Labor|
|Journal of Economic Literature Classification System:||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)
|Sets:||Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
|Date Deposited:||05 Jun 2008 09:31|
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