Performance Pay and Productivity
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Open Access
- 1 December 2000
- journal article
- Published by American Economic Association in American Economic Review
- Vol. 90 (5) , 1346-1361
- https://doi.org/10.1257/aer.90.5.1346
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. (JEL J00, J22, J3)Keywords
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