Helper, Susan; Kleiner, Morris M.; Wang, Yingchun - National Bureau of Economic Research (NBER) - 2010
Economists have often argued that "pay for performance" is the optimal compensation scheme. However, use of the … simplest form of pay for performance, the piece rate, has been in decline in manufacturing in recent decades. We show both … performance on easy-to-observe tasks, enhanced performance on hard-to-observe tasks, and improved firm profitability. Our analysis …