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Title:Who pays for performance? PDF Logo
Authors:Barth, Erling
Bratsberg, Bernt
Hægeland, Torbjørn
Raaum, Oddbjørn
Issue Date:2006
Series/Report no.:IZA Discussion Papers 2142
Abstract:Using Norwegian establishment surveys from 1997 and 2003, we show that performance-related pay is more prevalent in firms where workers of the main occupation have a high degree of autonomy in how to organize their work. This observation supports an interpretation of incentive pay as motivated by agency problems. Performance-related pay is also more widespread in large firms. Traditionally, wage setting in the Norwegian labor market has been dominated by negotiations between trade unions and employer associations at the central and local levels, with a fixed hourly wage as a predominant element of the wage scheme. Our results show that performance-related pay is less common in highly unionized firms and in firms where wages are determined through centralized bargaining. Nevertheless, the evidence presented in this paper reveals that performance pay is on the rise in Norway, even after accounting for changes in industry structure, bargaining regime, and union density. Finally, we find that the incidence of performance-related pay relates positively to product-market competition and foreign ownership.
Subjects:performance related pay
agency problems
compensation methods
JEL:J33
M52
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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