Prague Economic Papers 2016, 25(1):99-111 | DOI: 10.18267/j.pep.539

Work Incentive and Productivity in Spain

Mabel Pisa1, Rosario Sánchez2
1 ESIC Business and Marketing School, Departamento de Economía. Avda Blasco Ibanez, Valencia, Spain. (mabel.pisa@esic.edu).
2 Universidad de Valencia. Departamento de Análisis Económico. Campus dels Tarongers, Avda. Dels Tarongers s/n, Valencia, Spain. (rosario.sanchez@uv.es).

Work incentives are closely related to production performance. This paper presents evidence that the value added of a firm increases when relative labour wage rises, or the level of unemployment increases. Both circumstances imply evidence in favour of the efficiency wage model. This theory is consistent with the views of many managers and personal administrators, who tend to ascribe primary importance to wage setting as an incentive to increase effort. We use a micro panel data set of Spanish manufacturing firms for the period 2004-2009 to simultaneously estimate a stochastic frontier of a firm's value added and the inefficiency determinants. The data source is published in the Spanish Industrial Survey on Business Strategies (Encuesta sobre Estrategias Empresariales, ESEE) collected by the Fundación SEPI.

Keywords: value added, labour economic, industrial relations, efficiency
JEL classification: D24, J23, J24, L60

Published: January 1, 2016  Show citation

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Pisa, M., & Sánchez, R. (2016). Work Incentive and Productivity in Spain. Prague Economic Papers, 25(1), 99-111. doi: 10.18267/j.pep.539
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