Incentive and sorting effects of performance-related pay : empirical evidence from a new panel data set of a food & beverage company

Content Provider	Semantic Scholar
Author	Commerciale, Universitá Bocconi, Luigi
Copyright Year	2009
Abstract	The provision of incentives is widely considered an essential practice to align worker and manager interests to those of the employer. A large set of firms all over the world keep designing compensation schemes aimed at anchoring part of worker pay to firm performance. Despite the large amount of theoretical literature on performancerelated pay schemes, there is little empirical work on their effects on firm performance and workforce. In this work I present a new panel data set from an Italian firm operating in the food & beverage sector. I exploit an exogenous variation of its incentive scheme for middle managers to test the predictions that average performance will rise and more able managers will be selected. Results show a significant selection effect on the managers, but leave some doubts on the profitability of introducing the new incentive scheme. Moreover, I point out some concerns on the spill-over effects that incentive schemes have on the bottom-tier personnel of the firm when the provision of incentives is granted only for managers. ∗ I thank professors Michele Pellizzari and Tito Boeri for giving me the opportunity of working on this project. I am grateful to Pietro, Alicia, Cecilia and Eloisia for the extraordinary support they gave me in collecting the data. I thank all my friends for the intense and productive years together, especially Martina for taking care of me day by day. I will always be thankful to my family for the quiet and unfailing
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Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article