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Incentive pay and performance: Insider econometrics in a multi-unit firm

Hein Bogaard and Jan Svejnar

Labour Economics, 2018, vol. 54, issue C, 100-115

Abstract: Exploiting organizational reforms in a foreign-owned bank in Central-East Europe, we carry out an insider econometrics study of the implementation of modern human resource management reforms giving some employees high-powered incentives. We use branch-level panel data and particular features of the reform process to implement two estimators that address endogeneity bias (an outstanding issue in this literature) in a complementary fashion: an IV approach and Generalized Propensity Score estimation. In line with theory we show that some reforms had a positive impact on productivity. We also underscore the risks of introducing quantity-based incentives where quality is important.

Keywords: Insider econometrics; Endogeneity of HRM policies; Incentives; Foreign ownership; Banking; Central and Eastern Europe (search for similar items in EconPapers)
JEL-codes: F23 G21 M52 (search for similar items in EconPapers)
Date: 2018
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