Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250647 
Year of Publication: 
2022
Series/Report no.: 
IZA Discussion Papers No. 14986
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Group-based incentive pay is attractive in contexts where production is complex and interdependent, yet freeriding is a paramount concern. We assess the introduction of group-based performance pay in a modern industrial production setting using difference-in-difference estimation. Performance increased by 19 percent, with three quarters coming from increased performance of existing workers and the remaining from selection; workers became more efficient and were absent less often. We find little evidence of freeriding; quantile regressions show increased performance throughout the distribution of workers. Features of the design and implementation process created trust, a common goal, and a shared identity, which limited freeriding.
Subjects: 
difference-in-differences
performance pay
group-based incentive
freeriding
incentive effects
selection effects
absenteeism
efficiency
performance
productivity
trust
JEL: 
M5
J33
L23
Document Type: 
Working Paper

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