Performance-Related Pay or Pay for Participation? Forms of Agreement and Determinants: Evidence from Companies in Emilia-Romagna

Abstract

Since the July 1993 agreement in Italy, the adoption of company agreements based on a link between compensation and company performance has spread, becoming quite significant a presence even at the local level, without, however, involving companies overall where collective bargaining takes place. Consequently, studies of bonuses have recently been addressed to the examination of this phenomenon also for firms located in specific geographical areas, not just with reference to a sample of them, in general of medium-large size, at the national level. In this study, company bargaining on performance-related pay (PRP) and/or pay for participation (PFP) is examined in the years 1994-1997 in Emilia-Romagna. First of all, forms of agreement on PRP/PFP are analysed to find out the incentive, risk-sharing and participation mechanisms suggested by economic theory and embodied within each contract. Secondly, an econometric analysis is carried out on the factors behind the introduction of PRP/PFP, and of the various forms it takes in practice.

JEL Classification: J33, J59