Does Group-Based Incentive Pay Lead To Higher Productivity? Evidence from a Complex and Interdependent Industrial Production Process

Anders Frederiksen (), Daniel Baltzer Schjødt Hansen and Colleen Flaherty Manchester ()
Additional contact information
Daniel Baltzer Schjødt Hansen: Aarhus University
Colleen Flaherty Manchester: University of Minnesota

No 14986, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Group-based incentive pay is attractive in contexts where production is complex and interdependent, yet freeriding is a paramount concern. We assess the introduction of group-based performance pay in a modern industrial production setting using difference-in-difference estimation. Performance increased by 19 percent, with three quarters coming from increased performance of existing workers and the remaining from selection; workers became more efficient and were absent less often. We find little evidence of freeriding; quantile regressions show increased performance throughout the distribution of workers. Features of the design and implementation process created trust, a common goal, and a shared identity, which limited freeriding.

Keywords: absenteeism; selection effects; incentive effects; freeriding; group-based incentive; performance pay; difference-in-differences; efficiency; performance; productivity; trust (search for similar items in EconPapers)
JEL-codes: J33 L23 M5 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2022-01
New Economics Papers: this item is included in nep-bec, nep-eff, nep-hrm and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published as ' Group-based incentives and individual performance: Unpacking the effort response' in: ILR Review, 2024, 77 (2), 273-293.

Downloads: (external link)
https://docs.iza.org/dp14986.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp14986

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().