NBER Working Papers by Susan Helper

Economists have often argued that "pay for performance" is the optimal compensation scheme. However, use of the simplest form of pay for performance, the piece rate, has been in decline in manufacturing in recent decades. We show both theoretically and empirically that these changes are due to adoption of "modern manufacturing" in which firms produce a greater variety of products to a more demanding quality and delivery standard. We further develop a theory of the type of compensation system appropriate for this kind of production, in which there is a high return to “multi-tasking”, where the same workers perform both easy-to-observe and hard-to-observe tasks and to “just-in-time” production, which entails a high cost of holding inventory. We test these predictions using detailed month...

The study examines US-European productivity and worker attitude differences, focusing on changes in incentive structures. We analyze productivity and worker attitudes in five plants in the UK and US belonging to the same multinational producer of automotive sensors and actuators. We examine the firm's efforts to make complementary changes in product strategy and human-resource policies. In particular, we look at the impact of a Value-Added Gainsharing plan (VAG) that was introduced at different times among the four plants. Our analysis draws on multiple plant visits, surveys of almost all of the workforce, and confidential financial data. Our study offers a rare look inside a low-wage, non-union firm. We find that the VAG had an impact on productivity and profitability. We find that the ...

Over the last 20 years, the success of Japanese manufacturing firms has brought renewed attention to the importance of cost reduction on existing products as a source of productivity growth. This paper uses survey data and field interviews from the auto supply industry to explore the determinants of average-cost reduction for a sample of 171 plants in the United States and Canada between 1988 and 1992. The main result is that the determinants of cost reduction differ markedly between firms which had employee involvement programs in 1988 and firms that did not. The two groups of firms achieved equal amounts of cost reduction, but did so in very different ways. Firms with employee involvement saw their costs fall more if they also had such involvement gained no cost-reduction benefit fro...

Using an original data source, this paper investigates the circumstances under which firms adopt computer numerical control (CNC), an important type of flexible automation which can significantly increase productivity, product variety and quality. The paper shows that arms'-length supplier/customer relationships are a significant barrier to CNC adoption, even where CNC would improve efficiency. For firms where CNC would be efficient, but who currently receive little commitment from their customers, an increase in contract length of one year would increase the adoption rate by 30%. These results have theoretical implications in two areas. First, the paper integrates questions of appropriability into the technical change literature, by adding supplier relations as a determinant of techno...