Discussion Paper Details

Please find the details for DP4431 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Relative and Absolute Incentives: Evidence on Worker Productivity

Author(s): Oriana Bandiera, Iwan Barankay and Imran Rasul

Publication Date: June 2004

Keyword(s): absolute incentives, relative incentives and social preferences

Programme Area(s): Public Economics

Abstract: We use personnel data to compare worker productivity under a relative incentive scheme, where worker pay is negatively related to the average productivity of co-workers, with productivity under piece rates ? where pay is based on individual productivity alone. We find that for the average worker, productivity is at least 50% higher under piece rates. We show this is because workers partially internalize the negative externality they impose on others under the relative incentive scheme and do so to a greater extent when they work alongside their close friends. The results illustrate the importance of understanding how workers behave in the presence of externalities when designing incentive schemes.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4431

Bibliographic Reference

Bandiera, O, Barankay, I and Rasul, I. 2004. 'Relative and Absolute Incentives: Evidence on Worker Productivity'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4431