Does Group-Based Incentive Pay Lead To Higher Productivity? Evidence from a Complex and Interdependent Industrial Production Process

Arbeitspapier

Group-based incentive pay is attractive in contexts where production is complex and interdependent, yet freeriding is a paramount concern. We assess the introduction of group-based performance pay in a modern industrial production setting using difference-in-difference estimation. Performance increased by 19 percent, with three quarters coming from increased performance of existing workers and the remaining from selection; workers became more efficient and were absent less often. We find little evidence of freeriding; quantile regressions show increased performance throughout the distribution of workers. Features of the design and implementation process created trust, a common goal, and a shared identity, which limited freeriding.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 14986

Classification and Topics

• Classification: Wirtschaft ; Compensation Packages; Payment Methods ; Organization of Production
• Subject: difference-in-differences ; performance pay ; group-based incentive ; freeriding ; incentive effects ; selection effects ; absenteeism ; efficiency ; performance ; productivity ; trust

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Frederiksen, Anders ; Hansen, Daniel Baltzer Schjødt ; Flaherty Manchester, Colleen
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/250647
• Last update: 10.03.2025, 11:42 AM CET