Discussion Paper Details

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Title: Incentive Pay and Performance: Insider Econometrics in a Multi-Unit Firm

Author(s): Hein Bogaard and Jan Svejnar

Publication Date: January 2014

Keyword(s): Banking, Central and Eastern Europe, Endogeneity of HRM Policies, Foreign Ownership, Incentives and Insider Econometrics

Programme Area(s): Industrial Organization, Labour Economics and Public Economics

Abstract: We exploit organizational reforms in a foreign-owned bank in Central-East Europe to study the implementation of modern HRM policies in an emerging market context. We have branch-level data and use our knowledge of the process that led to the adoption of the reforms to implement two estimators that address endogeneity bias in a complementary fashion: an IV approach and Generalized Propensity Score estimation. Our results show that some of the reforms had a positive impact on productivity, but they also underscore the risks of quantity-based incentives where quality is important.

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Bibliographic Reference

Bogaard, H and Svejnar, J. 2014. 'Incentive Pay and Performance: Insider Econometrics in a Multi-Unit Firm'. London, Centre for Economic Policy Research.