Uncertainty, Job Complexity and Incentives: an Empirical Analysis of Spanish Industrial Firms

Marco Barrenechea-Méndez (Universidad Autónoma de Barcelona)
Eduardo Rodes (Universidad Autónoma de Barcelona)
Pedro Ortín-Ángel (Universidad Autónoma de Barcelona)

Abstract: In this article we attempt to provide empirical evidence on the role of uncertainty and job complexity in the pay-for-performance strength and autonomy provision decisions in the blue collar workers’ context. One of the predictions of the agency model is the trade-off between the workers’ pay-for-performance strength, intended to elicit effort, and the uncertainty on their performance realizations. The inconclusive evidence on this prediction has encouraged the development of alternative models. A common idea in them is that pay-for-performance is also a mechanism to take advantage of the workers’ private information observed in complex jobs. Strengthen pay-for-performance increases his interest to use his private knowledge. So, there is a positive effect on pay-for-performance of job complexity. Also, Prendergast (2002) suggests that this effect is through the provision of autonomy. Uncertainty is proxy by the demand variability and job complexity by an index on the complexity of several dimensions of the tasks. Relying on dataset of 358 Spanish industrial plants we found a positive effect on the provision of autonomy of job complexity and demand variability. We also found a positive effect on the pay-for-performance strength of workers’ autonomy. And then support for Prendergast (2002)’s suggestions. Also, once we control by autonomy, as suggested by the standard model, the effect of demand variability on the pay-for-performance strength is negative

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