American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Performance Pay and Productivity
American Economic Review
vol. 90,
no. 5, December 2000
(pp. 1346–1361)
Abstract
Much of the theory in personnel economics relates to effects of monetary incentives on output, but the theory was untested because appropriate data were unavailable. A new data set for the Safelite Glass Corporation tests the predictions that average productivity will rise, the firm will attract a more able workforce, and variance in output across individuals at the firm will rise when it shifts to piece rates. In Safelite, productivity effects amount to a 44-percent increase in output per worker. This firm apparently had selected a suboptimal compensation system, as profits also increased with the change.Citation
Lazear, Edward, P. 2000. "Performance Pay and Productivity." American Economic Review, 90 (5): 1346–1361. DOI: 10.1257/aer.90.5.1346JEL Classification
- J33 Compensation Packages; Payment Methods
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity