Performance Pay and Productivity

Edward Lazear

American Economic Review, 2000, vol. 90, issue 5, 1346-1361

Abstract: Much of the theory in personnel economics relates to effects of monetary incentives on output, but the theory was untested because appropriate data were unavailable. A new data set for the Safelite Glass Corporation tests the predictions that average productivity will rise, the firm will attract a more able workforce, and variance in output across individuals at the firm will rise when it shifts to piece rates. In Safelite, productivity effects amount to a 44-percent increase in output per worker. This firm apparently had selected a suboptimal compensation system, as profits also increased with the change.

JEL-codes: J24 J33 (search for similar items in EconPapers)
Date: 2000
Note: DOI: 10.1257/aer.90.5.1346
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Citations: View citations in EconPapers (979)

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Working Paper: Performance Pay and Productivity (1996)
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