Wages and Labour Productivity: the role of performance-related pay in Italian firms

Mirella Damiani, Fabrizio Pompei and Andrea Ricci

No 124/2013, Quaderni del Dipartimento di Economia, Finanza e Statistica from Università di Perugia, Dipartimento Economia

Abstract: This paper analyses the role of Performance Related Pay (PRP) agreements on labour productivity and wages. Its main contribution is thus to investigate the effects of PRP on both dimensions, i.e. productivity and distribution, whereas most of the studies of related literature are restricted to one of those aspects. All estimates are performed for a large sample of manufacturing and service Italian firms with more than five employees and a restricted sample including only unionised firms. It allows us to focus on a relevant feature of industrial relations represented by worker representation and its role in local wage setting in the Italian economy. The expected positive link between PRP and firm performance has been confirmed in all estimates, also controlling for a rich set of covariates. Furthermore, the comparison of productivity estimates with those for wages allows us to ascertain that payments by results might be not only rent-sharing devices, but schemes that substantially lead to efficiency enhancements. These findings have been validated by a number of robustness checks, also taking into account endogen eity by using instrumental variables and the treatments of 3SLS. The paper argues that well designed policies, that circumvent the limited implementation of PRP practices, would guarantee productivity improvement. The real effectiveness of these measures would not be weakened under union governance.

Keywords: Efficiency; Wages; Performance–related pay; unions. (search for similar items in EconPapers)
JEL-codes: D24 J31 J33 J51 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2013-11-18
New Economics Papers: this item is included in nep-bec, nep-eff, nep-eur, nep-lab, nep-lma and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www2.ec.unipg.it/quaderni/qd_124_web.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www2.ec.unipg.it:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
Working Paper: Wages and Labour Productivity: the role of Performance-Related Pay in Italian firms (2013)
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:pia:wpaper:124/2013

Access Statistics for this paper

More papers in Quaderni del Dipartimento di Economia, Finanza e Statistica from Università di Perugia, Dipartimento Economia Contact information at EDIRC.
Bibliographic data for series maintained by Ubaldo Pizzoli ().