Compensation and Incentives in the Workplace

  title={Compensation and Incentives in the Workplace},
  author={Edward P. Lazear},
  journal={Journal of Economic Perspectives},
  • E. Lazear
  • Published 1 August 2018
  • Economics
  • Journal of Economic Perspectives
Labor is supplied because most of us must work to live. Indeed, it is called “work” in part because without compensation, the overwhelming majority of workers would not otherwise perform the tasks. The theme of this essay is that incentives affect behavior and that economics as a science has made good progress in specifying how compensation and its form influences worker effort. This is a broad topic, and the purpose here is not a comprehensive literature review on each of many topics. Instead… 

Does Workplace Competition Increase Labor Supply? Evidence from a Field Experiment

This paper develops a novel field experiment to test the implicit prediction of tournament theory that competition increases work time and can therefore contribute to the long work hours required in

Beyond Income: Why We Want to Keep on Working Even if We Don’t Need the Money

This research focuses upon non-financial work motivation against the background of the debate about the introduction of a basic income. We focus on work commitment; that is the question what binds

The Impact of Formal Incentives on Teams: Micro-Evidence From Retail

While the impact of formal incentives on individuals is well understood, their impact on teams is less clear. A handful of field experiments document a small or null impact of incentives on teams.

The Unintended Consequences of Conventions and Policies

In the first chapter, I analyze the dynamic labor effort response to an incentive structure under which productivity is uncertain and underperformance is punished. Using data on SQF practices from


Studies in labor economics face severe difficulties when identifying the relationship between wages and labor productivity. This paper presents a novel identification strategy and demonstrates that

What is an Australian Job Worth?

The value of a job is an important question from management, human resources, legal and public policy perspectives, yet we lack good empirical estimates of this value. This paper sets out a

Creativity under Pressure: Performance Payments, Task Type and Productivity*

Competition is found to be the one incentive-based pay scheme that boosts productivity, and all incentivizing payment schemes improve productivity relative to flat rate payment.

Incentive Pay and Firm Productivity: Evidence from China

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

Gig Workers and Performance Pay: A Dynamic Equilibrium Analysis of an On-Demand Industry

In many online product markets, firms manufacture and supply products almost immediately after receiving orders. Thus, firms need to ensure that their workers satisfy product demand, which can vary

Relational incentives theory.

Rel relational incentives theory is introduced, which distinguishes between two aspects of incentives: schemes and means, and offers a framework for analyzing the structural congruence between incentives and relationships, yielding predictions about the effects of incentives across different organizational and individual-level contexts.