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

Claudio Lucifora () and Federica Origo ()

No 6483, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: productivity; unions; performance related pay (search for similar items in EconPapers)
JEL-codes: J31 J33 J52 L61 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2012-04
New Economics Papers: this item is included in nep-eff, nep-eur, nep-hrm, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published as 'Performance-Related Pay and Firm Productivity: Evidence from a Reform in the Structure of Collective Bargaining' in: Industrial and Labor Relations Review, 2015, 68(3), 606-632

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