Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/232877 
Year of Publication: 
2021
Series/Report no.: 
IZA Discussion Papers No. 14125
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Using administrative data from a major Chinese insurance firm that raised its sales targets and rewards for insurance agents in a highly non-linear incentive system, we find that the improvement in productivity far outweighed the costs associated with bunching distortions and other gaming behaviors. Labor turnover decreased, which suggests that the extra pay for workers exceeded the non-pecuniary cost of extra effort by workers, and thus improved their well-being. The firm gained about two-thirds of the higher net output, making the reform profitable. Analysis of non-linear incentive systems should accordingly focus more on the productivity-enhancing than on the distortionary effects.
Subjects: 
non-linear incentives
insurance commission
strategic gaming behavior
productivity
turnover rates
JEL: 
J33
M52
Document Type: 
Working Paper

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