Incentive Pay and Firm Productivity: Evidence from China

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: GLO Discussion Paper ; No. 479

Classification and Topics

• Classification: Wirtschaft ; Industrialization; Manufacturing and Service Industries; Choice of Technology ; Technological Change: Choices and Consequences; Diffusion Processes ; Personnel Economics: Compensation and Compensation Methods and Their Effects ; Compensation Packages; Payment Methods ; Socialist Enterprises and Their Transitions
• Subject: Incentive Pay ; Firm Productivity ; Labor Scarcity ; China ; Instrumental Variables

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jin, Zhangfeng ; Pan, Shiyuan
• Event: Veröffentlichung
• (who): Global Labor Organization (GLO)
• (where): Essen
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/214623
• Last update: 10.03.2025, 11:44 AM CET