Performance Related Pay and Firm Productivity: New Evidence from a Quasi-Natural Experiment in Italy

29 Pages Posted: 21 Apr 2012

See all articles by Claudio Lucifora

Claudio Lucifora

Università Cattolica del Sacro Cuore di Milano ; IZA Institute of Labor Economics

Federica Origo

University of Bergamo

Abstract

This paper investigates the causal effect of a switch from fixed wages to collective performance-related pay on firm productivity, exploiting an exogenous variation in the institutional environment regulating collective bargaining. We find that the introduction of collective performance related pay significantly increases productivity by around 3-5 per cent, but such effect varies greatly by firm size, industry and union density. We show that the design of the PRP scheme – in terms of number and type of parameters used – is also relevant for firm productivity.

Keywords: performance related pay, productivity, unions

JEL Classification: J31, J33, J52, L61

Suggested Citation

Lucifora, Claudio and Origo, Federica, Performance Related Pay and Firm Productivity: New Evidence from a Quasi-Natural Experiment in Italy. IZA Discussion Paper No. 6483. Available at SSRN: https://ssrn.com/abstract=2043485

Claudio Lucifora (Contact Author)

Università Cattolica del Sacro Cuore di Milano ( email )

Department of Economics and Finance
Largo Gemelli, 1
20123 Milano
Italy
+39 027 234 2525 (Phone)
+39 027 234 2781 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Federica Origo

University of Bergamo ( email )

Via Salvecchio, 19
Bergamo, 24129
Italy

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