Purpose The paper analyses the role of performance related pay (PRP) on productivity and wages of Italian firms. Design/methodology/approach A unique dataset for the Italian economy, obtained from the ISFOL Employer and Employee Surveys (2005, 2007, 2010), is used to estimate the relationship between PRP, labour productivity and wages, also controlling for an ample set of covariates. We performed standard quantile regressions to investigate heterogeneity in associations of PRP with labour productivity and wages . In a second stage, the endogeneity of PRP was taken into account by using instrumental variable quantile regression techniques. Findings The econometric estimates suggests that PRP are incentive schemes that substantially lead to efficiency enhancements and wage gains. These findings are confirmed for firms under union governance and suggest that well designed policies, that circumvent the limited implementation of PRP practices, would guarantee productivity improvement and wage premiums for employees. Research limitations/implications The main limitation of our findings concerns PRP data, that do not offer statistical information on different types of schemes, at group or individual level. Originality/value This paper is the first to investigate, on a national scale for the Italian economy, the role of PRP on both productivity and wages, in order to shed light on the efficiency and distributive implications, whereas most of the studies of related literature are restricted to one of those aspects.
Performance related pay, productivity and wages in Italy: a quantile regression approach
DAMIANI, Mirella;POMPEI, Fabrizio;
2016
Abstract
Purpose The paper analyses the role of performance related pay (PRP) on productivity and wages of Italian firms. Design/methodology/approach A unique dataset for the Italian economy, obtained from the ISFOL Employer and Employee Surveys (2005, 2007, 2010), is used to estimate the relationship between PRP, labour productivity and wages, also controlling for an ample set of covariates. We performed standard quantile regressions to investigate heterogeneity in associations of PRP with labour productivity and wages . In a second stage, the endogeneity of PRP was taken into account by using instrumental variable quantile regression techniques. Findings The econometric estimates suggests that PRP are incentive schemes that substantially lead to efficiency enhancements and wage gains. These findings are confirmed for firms under union governance and suggest that well designed policies, that circumvent the limited implementation of PRP practices, would guarantee productivity improvement and wage premiums for employees. Research limitations/implications The main limitation of our findings concerns PRP data, that do not offer statistical information on different types of schemes, at group or individual level. Originality/value This paper is the first to investigate, on a national scale for the Italian economy, the role of PRP on both productivity and wages, in order to shed light on the efficiency and distributive implications, whereas most of the studies of related literature are restricted to one of those aspects.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
