TY  - JOUR
AU  - Lazear,Edward P.
TI  - Performance Pay and Productivity
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5672
PY  - 1996
Y2  - July 1996
UR  - http://www.nber.org/papers/w5672
L1  - http://www.nber.org/papers/w5672.pdf
N1  - Author contact info:
Edward P. Lazear
Graduate School of Business
Stanford University
Stanford, CA 94305
Tel: 650/723-9136
Fax: 650/723-0498
E-Mail: lazear@stanford.edu
M2  - featured in NBER digest on 1997-01-01
AB  - What happens when a firm switches from paying hourly wages to paying piece rates?  The theory developed below predicts that average productivity rises, that the firm will attract a more able work force and that the variance in output across individuals at the firm will rise as well.  The theory is tested with data from a large autoglass company that changed compensation structures between 1994 and 1995.  All theoretical predictions are borne out.  In the firm examined, the productivity effects are extremely large, amounting to anywhere from about 20% to 36% of output, depending on what is held constant.  About half of the worker-specific increase in productivity is passed on to workers in the form of higher wages.
ER  -