Arbeitspapier
Worker separation under performance pay: Empirical evidence from Finland
This paper investigates the role of individual incentive (II) and group incentive (GI) pay as determinants of worker separation. We use a large linked employer-employee panel data set for full-time male manufacturing workers during 1997-2006 from Finland. We follow actual job spells and switches of individual employees and define separation as worker exit from his current employer. The key finding for white-collar workers is that group incentive pay is associated significantly with increased probability of separation and hence diminished employment stability, but in large firms only. For blue-collar workers our results consistently indicate that individual incentive pay is associated with a decreased probability of separation and hence enhanced employment stability, both in small and large firms. Our finding that group incentive pay increases the risk of separation for white-collar workers is more consistent with theoretical work such as Lazear (2000) and Fehr and Gaechter (2000), while uncovering that individual incentive pay decreases employment stability for blue-collar workers supports theoretical work such as Parent (1999) and Paarsch and Shearer (2000).
- ISBN
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978-952-323-193-1
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Finland Research Discussion Papers ; No. 33/2017
- Classification
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Wirtschaft
Compensation Packages; Payment Methods
Personnel Economics: Compensation and Compensation Methods and Their Effects
Wage Level and Structure; Wage Differentials
Job, Occupational, and Intergenerational Mobility; Promotion
Labor Turnover; Vacancies; Layoffs
- Event
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Geistige Schöpfung
- (who)
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Jones, Derek C.
Kalmi, Panu
Kato, Takao
Mäkinen, Mikko
- Event
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Veröffentlichung
- (who)
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Bank of Finland
- (where)
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Helsinki
- (when)
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2017
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Jones, Derek C.
- Kalmi, Panu
- Kato, Takao
- Mäkinen, Mikko
- Bank of Finland
Time of origin
- 2017