Performance Pay and Productivity of Low- and High-Ability Workers

28 Pages Posted: 6 Oct 2008 Last revised: 6 Apr 2009

See all articles by Ignacio Franceschelli

Ignacio Franceschelli

Northwestern University

Sebastian Galiani

University of Maryland - Department of Economics

Eduardo Gulmez

University of San Andres (UMSA)

Date Written: December 2008

Abstract

Existing literature has mainly focused on analyses of the overall effect of a change in the incentive scheme. Lazear (2000), for example, estimates the average increase in productivity after a firm switches from an hourly-wage scheme to a piece-rate plus basic-wage scheme. His paper does not, however, account for the fact that many workers remained within the basic-wage range after the change was made in the incentive scheme. In the present paper we explore how the incentive effect might have been different for those workers seeking the basic wage, and those workers seeking the piece-rate component of the wage. Surprisingly, the change in productivity is approximately the same in percentage terms for both types of workers.

Suggested Citation

Franceschelli, Ignacio and Galiani, Sebastian and Gulmez, Eduardo, Performance Pay and Productivity of Low- and High-Ability Workers (December 2008). Available at SSRN: https://ssrn.com/abstract=1279189 or http://dx.doi.org/10.2139/ssrn.1279189

Ignacio Franceschelli (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Sebastian Galiani

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Eduardo Gulmez

University of San Andres (UMSA)

Vita Dumas 284
Victoria, Buenos Aires 1644
Argentina

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