Incentive Pay and Firm Productivity: Evidence from China
Zhangfeng Jin () and
No 479, GLO Discussion Paper Series from Global Labor Organization (GLO)
This study examines the causes and consequences of incentive pay adoption among Chinese manufacturing firms. First, we find that a higher degree of labor scarcity encourages firms to adopt more incentive pay. Second, using an instrumental variables approach, we find that a 10 percentage point increase in the intensity of incentive pay results in 38% higher firm productivity. Third, the average productivity differences between SOEs and non-SOEs decrease by about 65% after controlling differences in incentive pay adoption. Therefore, facilitating incentive pay adoption among firms with better labor endowments (e.g. SOEs) increases productivity while reduces resource misallocation in developing countries.
Keywords: Incentive Pay; Firm Productivity; Labor Scarcity; China; Instrumental Variables (search for similar items in EconPapers)
JEL-codes: J33 M52 O14 O33 P31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cna, nep-eff, nep-hrm, nep-lma and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:479
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