NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Teng Li

Department of Economics
National University of Singapore
Institute of Real Estate Studies
21 Heng Mui Keng Terrace #04-02
Singapore 119613

E-Mail: irslt@nus.edu.sg
Institutional Affiliation: National University of Singapore

NBER Working Papers and Publications

January 2019Non-linear Incentives and Worker Productivity and Earnings: Evidence from a Quasi-experiment
with Richard B. Freeman, Wei Huang: w25507
Firms often use non-linear incentive systems to motivate workers to achieve specified goals, such as paying bonuses to reach targets in sales, production, or cost reduction. Using administrative data from a major Chinese insurance firm that raised its sales targets and rewards for insurance agents greatly in 2015, we find that increased incentives induced agents to increase sales of the increasingly incentivized life insurance products, bunched around the new targets, albeit in part with some low quality sales that led to canceled contracts, while reducing sales of products out-side the new incentive system. The greater non-linear incentives raised agent incomes and low-ered turnover and substantially increased firm revenues net of the increase in payments to agents. The stock market react...
 
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