The Impact of Technological Change on Incentive Provision

Studi Economici N. 95, 2008/2

32 Pages Posted: 27 Sep 2012 Last revised: 26 Dec 2013

See all articles by Maurizio Lisciandra

Maurizio Lisciandra

University of Messina - Department of Economics

Date Written: 2008

Abstract

The simple trade-off between incentive and risk, which is crucial to the agency problem, is not a sufficient explanation for the ineffectiveness of a specific output-related pay such as the contract system adopted in the US iron and steel industry during the second half of the nineteenth-century. The high rate of technological innovation along with workers’ extensive bargaining power made output-related pay a sub-optimal solution. This stylised fact unveils the conflicting nature of piece-rate pay compared to fixed pay as new technology is introduced and stimulates an analysis of the interaction between technological change, bargaining powers, and payment systems which can be conducive to a better understanding of the agency problem and the use of incentive pay.

Keywords: Incentive Contracts, Inside Contracting, Unions, Technological Change

JEL Classification: J33, J51, N31, O33

Suggested Citation

Lisciandra, Maurizio, The Impact of Technological Change on Incentive Provision (2008). Studi Economici N. 95, 2008/2, Available at SSRN: https://ssrn.com/abstract=2152981

Maurizio Lisciandra (Contact Author)

University of Messina - Department of Economics ( email )

Piazza Pugliatti 1
Messina, 98122
Italy
+39 (0)906764620 (Phone)

HOME PAGE: http://https://sites.google.com/site/mlisciandra/

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