Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/214623
Authors: 
Jin, Zhangfeng
Pan, Shiyuan
Year of Publication: 
2020
Series/Report no.: 
GLO Discussion Paper 479
Abstract: 
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.
Subjects: 
Incentive Pay
Firm Productivity
Labor Scarcity
China
Instrumental Variables
JEL: 
O14
O33
M52
J33
P31
Document Type: 
Working Paper

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