Employees’ motivation and high performance workplace practices

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Employees’ motivation and high performance workplace practices Annalisa Cristini * University of Bergamo October 2011 * This is a very revised version of a paper I wrote during my sabbatical year at the Department of Economics and Nuffield College, Oxford. I wish to thank Steve Nickell for extensive discussions and many important insights. I also thank Duncan Gallie, Ken Mayhew, Ying Zhou, the participants to the Oxford Economics Department seminar (May 2007) and J¨orn-Steffen Pischke for comments on a previous version of the paper. The usual caveats apply. Research grants from the University of Bergamo are acknowledged. Contact address: Department of Economics, University of Bergamo, Via dei Caniana 2, 24127 Bergamo, Italy. Email: [email protected]. Tel.: +39 035 2052 549; Fax: +39 035 2052549. 1

Transcript of Employees’ motivation and high performance workplace practices

Page 1: Employees’ motivation and high performance workplace practices

Employees’ motivation and high performance workplace practices

Annalisa Cristini ∗

University of Bergamo

October 2011

∗This is a very revised version of a paper I wrote during my sabbatical year at the Department of Economics andNuffield College, Oxford. I wish to thank Steve Nickell for extensive discussions and many important insights.I also thank Duncan Gallie, Ken Mayhew, Ying Zhou, the participants to the Oxford Economics Departmentseminar (May 2007) and Jorn-Steffen Pischke for comments on a previous version of the paper. The usual caveatsapply. Research grants from the University of Bergamo are acknowledged. Contact address: Department ofEconomics, University of Bergamo, Via dei Caniana 2, 24127 Bergamo, Italy. Email: [email protected].: +39 035 2052 549; Fax: +39 035 2052549.

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Abstract

Existing evidence shows that employees’ motivation usually improves in presence of in-

novative workplace practices. This paper examines whether this result is ascribable to a

higher intrinsic motivation, which grants a higher effort for a given remuneration and job

quality, or to a higher extrinsic motivation. A simple model of organizational commitment is

suggested to help identify the channels through which innovative practices affect motivation.

The model is estimated on a nationally representative sample of Italian employees. Results

show that practices providing substantial empowerment are powerful intrinsic motivators:

for given pay and working conditions, they strengthen employees’ attachment to the firm

and identification with its values. In contrast, innovative practices bear only marginally on

the extrinsic motivation; moreover, pecuniary rewards are negative reinforcers when contin-

gent on performance; finally, the relative wage can affect employees’ attachment to the firm

but not their sense of belonging.

JEL Classifications: J28 J33 J53 M54

Keywords: High Performance Workplace Practices, Motivation, Commitment, Wages,

Working conditions.

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1 Introduction

More than forty years ago Leibenstein (1966, p.413) argued that “for a variety of reasons people

and organizations normally work neither as hard nor as effectively as they could” and regarded

motivation to be a major determinant of X-efficiency. Since Leibenstein’s work, the debate

about what motivates real people in real organizations (Simon, 1991) unfolded along the idea

that people’s management should hinge on commitment rather than control (Walton, 1985) and

contributed to the emergence of innovative work systems and management practices1 aimed at

enhancing employees’ commitment through substantial involvement and empowerment (Oster-

man, 1994 and 2000, European Commission, 2002).

This general view attracted a considerable attention and is now supported by a pretty sound

evidence2; by contrast, the more specific question of whether the new management practices

bear on employees’ extrinsic or the intrinsic motivation has not been investigated; yet, it is

immediately relevant to the firm costs: The case in which employees involved in the new system

exert a higher effort only to the extent that they share, in the form of higher monetary rewards,

the productivity gains engendered through their involvement3, is quite different from the case

in which involved employees are more willing to work simply for the work’s sake. In the former

case innovative practices can be regarded as ultimately extrinsic motivators; in the latter one

1Innovative work systems are usually characterized by so-called High Performance Workplace Practices(HPWP), which typically include: self managed teams, job rotation, formal arrangements aimed to openly discussproduction problems, suggestions schemes, performance related pay and information sharing; in some cases hiringprocedures and training are also considered. See for example Pfeffer (2007).

2Freeman and Kleiner (2000) show that employees participating in employee involvement programs (like totalquality management, opinion surveys, information sharing, committee on productivity, worker involvement inthe design of employee involvement programs, worker involvement in work processes, self managed teams) reporthigher trust and loyalty to the firm and higher work satisfaction than non-involved employees. Godard (2001),using a sample of Canadian workers, finds that job satisfaction, commitment and motivation are all positivelyrelated to an indicator of new workplace practices although he also finds that work intensification can in samecases offsets the benefits. In another Canadian matched employer-employee dataset Mohr and Zoghi (2008)find that innovative practices (suggestion schemes, task teamworking, job rotation, quality circles, informationsharing, self directed work-group and class training) are all positively related to job satisfaction. For Europe,Bauer (2003) finds that the degree of job autonomy (regarding tasks order, methods of work, job speed andquality) and the extent of information sharing (horizontal and vertical communication) drive the positive relationbetween HPWP and job satisfaction. However, for Britain, using WERS 2004, Guest and Conway (2007) failto find any significant association between employees’ organizational commitment and a bundle of innovativehuman resource management practices. Guest (1999) provides a discussion of how employees fare in presence ofinnovative practices.

3The positive role of innovative practices on firm productivity has, on the whole, a sound empirical support;see for example: Ichniowski, Shaw and Prennushi (1997) and Black and Lynch (2004) for the USA, Wood and DeMenezes (1998), Bryson et al (2005) and Patterson et al. (1997) for the UK, Bauer (2003) and Zwick (2004) forGermany, Greenan (1996) and Caroli and Van Reenen (2001) for France, Kato and Morishima (2002) for Japan;Cristini, Gaj and Leoni (2003) for Italy. Less clear-cut results are found on the role of innovative practices on thewage: these are discussed below in the text.

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they are genuinely intrinsic motivators (Frey, 1987; Frey and Jegen, 2011; Benabou and Tirole,

2003).

There are at least two further reasons why this distinction is likely to be relevant. The first

one rests on the so called ’hidden costs of rewards’ (Lepper and Greene, 1978; Deci and Ryan,

1985): external interventions, particularly in the form of contingent pecuniary rewards may be

negative reinforcers, thus can partially or totally crowd out one’s intrinsic motivation. This

result, long known in cognitive psychology, has been recently derived by Benabou and Tirole

(2003) within an extended principal agent models where asymmetric information between the

principal and the agent is the conditio sine qua non for this effect to arise.4. The second reason

is that, even in absence of crowding out effects, extrinsic and intrinsic motivations normally

relate to different work attitudes and behaviors: according to a well known psychological view

initiated by Etzioni (1971) the remunerative power of the organization, not only may undermine

intrinsic motivation, but can also buy only a ’calculative’ type of commitment.

This paper suggests an analytical framework to distinguish between the sources of work mo-

tivation induced by innovative workplace practices and derive the theoretical conditions for the

optimal amount of organizational commitment to rise in presence of such practices. A corre-

sponding empirical model is estimated using a nationally representative sample of 3605 Italian

employees working in the private sector. Results show that the theoretical conditions are easily

satisfied for some but not all innovative practices and that these practices are essentially intrin-

sic motivators. The relative wage is found to have a narrower scope than the best innovative

practices as it helps retaining workers but don’t get to their sense of belonging; furthermore,

the evidence shows that pecuniary rewards, if contingent on performance, can even reduce the

firm attachment by backfiring on employees’ intrinsic motivation. These crowding out effects

are found to be related to the workers’ educational attainments and are interpreted along the

theoretical notion of sorting condition (Benabou and Tirole, 2003).

The rest of the paper is organized as follows: the next section introduces the theoretical set

up; section 3 describes the data, section 4 illustrates the empirical model and the estimation

strategy, section 5 discusses the econometric results and the last section concludes.

4Various work situations where external interventions are likely to undermine intrinsic motivation are discussedby Frey (1997) and a survey of the evidence is reviewed in Frey and Jegen (2001); crowding out effects withinlabour relationships are supported by laboratory and field experiments (Gneezy and Rustichini, 2000; Fehr andSchmidt, 2000) and by some econometric evidence based on survey and case studies (Jordan, 1986; Barkema,1995; Minkler 2004).

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2 The model

Each employee chooses her amount of commitment Ω∗ in order to maximize the net benefit,

where the benefit and cost functions are respectively concave and convex in commitment: BΩ >

0, BΩΩ < 0 and CΩ > 0, CΩΩ > 0 (Frey, 1997). The marginal benefit is assumed to be positively

related to the employee’s intrinsic motivation (µ) and relative wage5 (w) while the marginal cost

declines with the quality of the working conditions (d). If the benefit and cost functions are

quadratic in Ω and linear in the parameters, the marginal functions can be expressed as follows:

BΩ = [λµ+ (1− λ)w]− c1Ω (1)

CΩ = −b3d+ c2Ω (2)

where c1, c2, b3 are positive parameters and λ (0 < λ < 1) captures the importance that the

employee attaches to her intrinsic motivation, relative to her wage, in the marginal benefit.

We argue that innovative practices can affect the determinants of the marginal benefit and the

marginal cost. First of all, they are expected to enhance intrinsic motivation to the extent that

they substantially empower employees (Benabou and Tirole (2003), enhance their firm identity

(Akerlof e Kranton (2005))6, increase workers’ interest in their their tasks, strengthen personal

interactions at work and involve employees in firms’ decisions (Frey (1997)). By contrast, con-

tingent rewards, if part of the innovative system, undermine intrinsic motivation as long as

employees perceive them as a means of control (Etzioni, 1971; Frey, 1997) or as negative signals

of the task attractiveness or of their own ability (Benabau and Tirole, 2003).

Innovative practices might further affect the marginal benefit through the wage. In presence

of wage bargaining, the productivity gains engendered by adopting innovative practices will be

distributed to employees’ salaries in proportion to the unions’ bargaining power; were bargaining

not relevant, the average wage could still rise in presence of productivity gains to the extent that

the employer unilaterally decides to do so on the basis of fairness or other efficiency wage con-

5The reference wage is thought to be the peer group’s wage; it will be specified in in the empirical section.6Benabou and Tirole (2003) use a generalized principal agent model and show that empowerment, if taken

to indicate a positive judgment on the employee’s ability on the part of the principal, can change employees’attitudes permanently. In a similar vein, Akerlof e Kranton (2005) show that the employee’s work effort rises, forgiven monetary incentives, when employees’ identity aligns with the firm’s goals and values.

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siderations (Akerlof, 1982; Nickell, 1996). Moreover, innovative practices might enhance human

capital (Caroli and Van Reenen, 2001; Bresnahan et al., 2002) bringing about skills upgrading

and consequent wage increases; finally, innovative practices might give rise to amenities or dis-

amenities and the wage could partly or totally compensate for them. Because of these partly

contrasting forces the link between innovative practices and the wage may be weak and indeed

the existing evidence is overall inconclusive.7.

Turning to the marginal cost of commitment, a strand of the health literature finds that some

innovative practices are associated with a deterioration of working conditions due to increasing

risks of injuries and occupational illnesses8, to higher rates of anxiety and work intensity and

to a reduced job security.9. Other scholars have stressed, on the contrary, that job autonomy,

discretion and reduced supervision which ensue from empowerment and involvement, enrich the

job content, are highly appreciated by the workers and highly compensated as amenities (Clark,

2004 Helliwell and Huang, 2005). A priori, the sign of the relation between working conditions

and innovative practices is therefore ambiguous.

7This is also the conclusion of Handel and Levine (2004)’s survey. Handel and Gittelman (2004), on a sampleof 1062 US establishments from the 1995 Survey of Employer-Provided Training, find no significant impact ofHPWP on either the average establishment wage or the individual wage. Osterman (2000), on a sample of about300 US establishments in the private sector, finds that core workers employed in firms that introduced HPWP fouryears before, enjoy no significant wage gains. Cappelli and Neumark (2001), on the subsample of firms presentsince 1977 in the Education Quality of the Workforce National Employer Survey (EQW NES) US panel, find apositive and significant relationship between practices and labour cost. Black, Lynch and Krivelyova (2004), onthe subsample of all manufacturing firms in the EQW NES also find a positive association between wages and thepractices of meetings and profit sharing, but only when practices are interacted with the union dummy. Osterman(2006) finds a positive impact of a principal component indicator of HPWP on the level of the median wage ofcore non-manager employees. Godard (2007), using Canadian and English data, finds that the combination ofunion representation and best practices yields relatively higher wages although high performance practices arestrongly associated with non-union workers’ wages.

8Askenazy (2001) uses a panel of 26 US sectors over four quinquennia from 1979 to 1991 and finds that totalquality management, job rotation and autonomous work teams are related to greater occupational injuries andillnesses. Farris and Brenner (2001) and Brenner et al. (2004) combine the 1993 US Survey of Employer ProvidedTraining with the 1993 Survey on Occupational Injuries and Illnesses and find that total quality management andthe interaction of total quality management and teamwork raises cumulative trauma disorders; the ”suspicionthat total quality management represents a new form of taylorism” is also raised by Adler et al., (1997). Morerecently, Askenazi and Caroli (2006) using a representative sample of French workers find quality norms and jobrotation to be associated with higher number of injuries and mental strain. Mohr and Zoghi (2008) use Canadiandata and find that quality circles rise the desire to work less hours due to stress but do not find a direct relationbetween days of work lost and HPWP.

9According to Gallie and Green (2002) UK skilled workers and workers upskilling are characterized by mountinganxiety, and Green (2004) associates work intensification to the new workplace. Osterman (2000) finds that asnew work systems may lead to thorough reorganizations and layoffs, job security is also jeopardized. Accordingto Black et al. (2004, Table 7) the probability of experiencing a 20% or more employment reduction is positivelyassociated with an intensive use of self managed teams and job rotation by non managerial workers although theresults are attenuated in unionized establishments.

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Taking stock of the above discussion, we model the following system of linear equations:

d = f(π|z) (3)

w = g(π, d|z) (4)

Ω∗ = c−1[λµ(π) + (1− λ)w + b3d] (5)

where z is a vector of exogenous variables (typically, the employee’s personal characteristics),

f(·) and g(·) are monotonic functions, equation (5) is derived from equating the marginal cost

and the marginal benefit of commitment, c = c1 + c2 > 0 captures the curvatures of the benefit

and cost functions and summarizes preferences.

Optimal commitment rises with involvement if the following holds:

λ∂µ

∂π+ (1− λ)

dw

dπ+ b3

∂d

∂π> 0 (6)

where dw/dπ = ∂w/∂π + ∂w/∂d · ∂d/∂π.

The condition is determined by three components: the effect of innovative practices on the

intrinsic motivation (λ · ∂µ/∂π), on the relative wage ((1 − λ) · dw/dπ) and on the working

conditions (b3 ·∂d/∂π). The empirical values of these three components are estimated in section

4 and innovative practices will be classified accordingly. The above inequality is always satisfied

if dw/dπ ≥ 0, ∂µ/∂π > 0 and ∂d/∂π > 0 and never satisfied if dw/dπ ≤ 0, ∂µ/∂π < 0 and

∂d/∂π < 0. The relative weight of the intrinsic motivation matters, however, when the three

components have opposite signs. Table 11 in the appendix derives the values of λ for which the

condition holds: as the effects of the practices on the wage and on working conditions decline

and become negative, λ must rise if ∂µ/∂π > 0 and decline if ∂µ/∂π < 0.

3 The data

The data used to estimate the model are taken from the survey OAC (”Organizzazione, Ap-

prendimento e Competenze” which translates as ”Organization, Learning and Competencies”)

designed by ISFOL (Institute for the Development of Workers’ Training, a public think tank

based in Rome) on the basis of Skills in Britain (Felstead et al., 2002) and addressed in 2004

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to a nationally representative sample of 4000 Italian employees working in the private sector

(ISFOL, 2007; Tomassini, 2006).10. The survey was carried out in collaboration with the Italian

Statistical Institute and its statistical structure was based on the Italian Labour Force Survey.

Employees were first contacted and then interviewed at home using CAPI; net of errors and in-

valid strings, 3605 observations were finally made available11. The detailed information that the

survey provides on employees’ involvement in innovative practices, on the content of their jobs,

on working conditions, on the presence of contingent premia, on the average wage, together with

numerous individual and firm characteristics, makes it a very useful dataset for this empirical

analysis.

Organizational commitment is measured on the basis of a standard set of statements on which

the employee is asked to agree or disagree using a Likert scale12: (i) This organization really

inspires the very best in me in the way of job performance; (ii) I am proud to be working for

this organization; (iii) I find that my values and the organization’s values are very similar; (iv)

I feel very little loyalty to this organization; (v) I am willing to work harder than I have to in

order to help this organization succeed; (vi) I would take almost any job to keep working for

this organization; (vii) I would turn down another job with more pay in order to stay with this

organization. In order to test for potential different effect of extrinsic and intrinsic motivation,

I distinguish between two types or dimensions of commitment: a dimension reflecting sharing

of values and firm identification, captured by items (i)-(v), and a dimension of firm attachment,

captured by items (vi)-(vii), characterized by a relatively stronger sense of commitment revealed

by the fact that the employee is ready to bear a ’cost’ to stay with the organization, implicit

either in the acceptance of ’any job’ or in the refusal of a better outside job offer. For conve-

nience I call the two components value and strong commitment and will be used as alternative

measures of Ω.13.

10http://www.isfol.it/Banche Dati/Organizzazione apprendimento e competenze (Oac)/index.scm11Because of problems related to eligibility details and low response rates required the conduct of some extra

interviews; the validation procedure discarded any bias between the two parts of the survey (ISFOL (2007),chapter 1).

12The statements are a subset of the most frequently used Mowday’s Organizational Commitment Questionnaire(Mowday et al. 1979) and are the same used in by Gallie et al. (1998) for Britain. The Likert scale is: Totallydisagree (1), Strongly disagree (2), Disagree (3),Indifferent (4), Fairly agree (5), Strongly agree (6), Totally agree(7).

13Gallie et al. (1998, p.238) comment that items (vi) and (vii) ”express a willingness to be flexible to the pointof some personal sacrifice, and can be regarded as particularly strong expressions of commitment (while) theremaining (items) are rather weaker expressions of identification with the organization and its values.” See alsoGodard (2001) for an equivalent distinction. Both measures are computed by summing the relevant items, afterreversing the scales of statement (iv), and then rescaling the indicators into 7 categories. The different skewness of

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Employees’ involvement in innovative practices is measured by a vector of dummy variables on

the basis of employees’ answers to the following specific questions: ”Do you take part in qual-

ity circles?” (qc); ”Do you participate in periodic employer-employee meetings?” (meet); ”In

the last 12 months have you made any suggestions to colleagues or heads aimed at improving

efficiency in your work?” (suggest); ”Has your company received any quality certification?”

(quality); ”Do you work in team?” (team); ”Is your team autonomous in task-related issues?”

(task)14; ”Is your team responsible for the output or service produced?” (resp); ”Is your team

autonomous in matters regarding the team members?” (group)15. On the basis of these infor-

mation, lean teams (team is true but none of task, resp and group is true) is distinguished

from various types of sociotechnological teams characterized according to the extent and types

of autonomy.16. In particular, when team, task, resp and group are all true, the team is

fully autonomous and the definition is very close to the one used by Cullie et al. (1999) and

Harley (2001); however, the approach used in this paper also allows one to detect intermediate

cases where only some of the autonomy dimensions may be present. With regard to contin-

gent rewards, we know whether the employee has received monetary premia on the basis of her

performance. Specifically, two are the relevant questions: ”Have you been formally appraised

at work in the last twelve months and do these appraisals affect your earnings in any way?”

the two densities (not shown) confirm that it is relatively easier to be value-committed than strongly-committed.Results are qualitative similar but not as clear cut, if item (v) is included in the strong commitment definitionrather in the value commitment one. Alternative composite indicators based on the number of statements therespondent agrees with, show distributions far away from the normal and were not used.

14Either one of these two item must be true: a) The team members together decide how to do the work; b)The team members together decide which other tasks to do.

15Either one of these three items must be true: a) The team members together propose the team leader tothe management; b) The team members together decide the team leader; c) The team members together decideabout matters regarding new team members.

16Autonomous or self managed teamworking origins in the Swedish-inspired sociotechnical team which, incontrast to the Japanese-inspired lean team, enjoys a significant degree of autonomy; although regarded as acrucial practice in the new work systems (Benders and Van Hootegem, 1999) the minimum discretion that a teammust enjoy in order to be classified as ’autonomous’ varies in the literature; for example, Cullie et al. (1999)and Harley (2001), both using UK WERS, define autonomous teams as those in which ”members work with oneanother and have responsibility for specific product or service and jointly decide how work is to be done” oras those in which ”members work with one another and have responsibility for specific product or service andjointly decide how work is to be done and appoint their own team leaders”. Scholars using EPOC (Benders et al.,2001) or similar surveys (Steijn, 2001) define a team to be autonomous if it has decision rights on at least 4 or5 out of 8 activities; these are: allocation of work, scheduling of work, quality of work, time keeping, attendanceand absence control, job rotation, coordination of work with other internal groups, improving work processes.Batt (2004) studies a case where self managed teams are those that assume supervisory tasks including: settingdaily assignments, writing up reports, covering breaks and schedules, handling non-routine problems, and callingdirectly on subject matter experts as needed. As it is clear from the longstanding sociological debate on selfmanaged teamworking, the difficulty of an exact definition reflects the eclectic implementation of this concept inthe real workplace (Steijn, 2001); then, in designing an empirically viable definition, it is important to retain asufficient flexibility.

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(earn); ”As a team member, do you receive monetary rewards based on the team performance?”

(teampay). A further question regards contingent training: ”Have you been formally appraised

at work in the last twelve months and do these appraisals affect the amount of training you

receive?” (train), which could also be regarded as a performance-related external intervention.

On the whole, π is composed of eleven dummy variables.

Finally, the overall quality of working conditions as perceived by the employees is measured

by a set of categorical variables; three of them regard physical working conditions: i. Fre-

quency of exposure to serious accidents (accidents); ii. Frequency of exhaustion from work

(exhaustion); iii. Effort intensity (effort intensity). Four variables concern the job content:

iv. Strictness of supervisor’s control (supervision); v. Job repetitiveness (repetitiveness);

vi. Job discretion (discretion); vii. Job autonomy on timing and effort (autonomy)17 and a

final variable regards job security: viii. Probability of unemployment over the next 12 months

(unemployment). The vector d is therefore composed of these eight variables which vary on

a 1-7 Likert scale, from low to high.

3.1 Innovative practices and employees’ commitment: descriptive evidence

Column 1 in Table 1 ranks workplace practices in descending order of frequency. Over 70%

of employees have given some suggestions in the last 12 months, and almost 60% take part in

joint meetings; nearly half of the employees work in teams but only 38% are members of teams

with autonomy on tasks and procedures18; a third of employees work in teams that are held

responsible for the output produced and a somewhat lower percentage of workers have some au-

tonomy in matters regarding the team leader and new members. Contingent monetary rewards

are not very common: earnings linked to individual performance assessments involve 13% of

employees while team performance related pay involves 8% of employees; training contingent on

individual assessments involves 10% of employees. Columns 2-5 of Table 1 report the ranking

of the practices by employees’ levels of education. With the exception of lean teams, the data

confirm that the frequency of involvement rises with employees’ educational attainment. This

point will be further discussed in section 5.2.

17The latter is obtained by summing the scores of three types of job autonomy: job autonomy on timing andeffort, job autonomy on tasks and their sequence and job autonomy on how to do the task. The total score isthen re-scaled to 1-7.

18As shown in Table 7 in the Appendix, 22% of all employees work in teams; of these, 48% are members offully autonomous teams, 14% work in task-autonomous teams, 12% work in task-autonomous-output-responsibleteams and 11% work in lean teams.

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Descriptive evidence supports the view that employees involved in new workplace practices are

relatively more committed to their organization than employees not involved (Table 2); the

former report significantly higher scores in loyalty, pride of belonging to the company, share of

values and readiness to work harder for the organization’s success. Employees using suggestion

schemes and taking part in joint meetings and QC are also more likely to forgo a better paid

job to stay with the organization but no innovative practice significantly increases employees’

willingness to take up any job to stay with the firm. As already found by Freeman and Kleiner

(2000) on US data, employees working in teams report higher scores in loyalty and willingness

to work harder; however, employees working in lean teams are significantly less inspired by the

organization and less in line with its values with respect to the other employees while those

working in task autonomous teams are relatively prouder of being part of their organization.

Contingent rewards are positively associated with employees’ pride, loyalty and effort but only

employees individually appraised declare to be relatively more inspired by the organization and

share its values. On the whole, being involved in the new practices appears to make a difference

more for value than for strong commitment: significantly higher scores in the latter are asso-

ciated only with joint meetings while relatively higher scores in the former are also associated

with suggestion schemes, task autonomous teamworking, contingent training and contingent

monetary rewards.

The relationships just described, being unconditional, could merely capture spurious correla-

tions; for example, if larger firms are relatively more likely to adopt innovative practice and can

also pay relatively higher wages that motivate their workforce, the relation between employ-

ees’ commitment and workplace practices would simply capture the role of firm size. The next

section then turns to the multivariate analysis.

4 Empirical model

By drawing from the theoretical analysis, the empirical model is specified as a linear system of

equations:

d = A1π +Φz+ u1 (7)

w = α2π + β2d+ ϕ2z+ u2 (8)

Ω = α3π + β3d+ γ3w + ϕ3z+ u3 (9)

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where d is the vector of categorical variables capturing the quality of the employee’s working

conditions, w is the log of the monthly take home relative wage, Ω is either one of the two mea-

sures of organizational commitment defined in the previous section, π is the vector of dummies

capturing employee’s involvement in innovative practices, z is the vector of controls.19. Both z

and π20 are assumed uncorrelated with the error terms u1, u2, u3. A1 and Φ1 are matrices of

coefficients and the remaining symbols are row vectors of coefficients.

Notice that by confronting equation (9) to the corresponding theoretical equation (5), γ3 =

(1− λ)c−1. Hence, as long a c−1 is constant across the two different measures of commitment,

which is the case if the employee’s preferences underlying her benefit and the cost functions

of commitment are constant, the empirical γ3 estimated for strong and value commitment are

informative on the magnitude of λ across the two types commitment. Again, by confronting the

empirical and the theoretical model, for each practice α3 = λµ(π)c−1 which, given the above ar-

gument can be informative on the role of innovative practices on employee’s intrinsic motivation,

in the two types of commitment.

4.1 Identification and estimation strategy

The system (7)-(9) is recursive; a useful approach for its identification would be to make it fully

recursive using covariance restrictions, thus avoiding the more common alternative of exclusion

restrictions: under full recursiveness the error covariance matrix is diagonal, all equations are

identified and OLS estimates are unbiased (Wooldridge, 2001). However, in this specific case,

the covariance matrix is unlikely to be diagonal because of common components in the error

terms. In particular, one should consider the possibility that the sorting of employees into new

work systems may not be random but related, for example, to some unobservable psychological

traits or family characteristics, or to the employee’s unobservable ability. The latter possibility

is of particular interest as existing results (Caroli and Van Reneen, 2001 and Bresnahan et al.,

2002) show that new workplace practices complement with high skill workers. In this case, if

controls in the regression only partially capture workers’ heterogeneity in cognitive and non

cognitive ability (Heckman et al., 2006), a self selection problem may arise. Specifically, if more

19Individual controls used in the empirical model include: ID, familiar status, children, education, skill level,experience, tenure, occupation, region of residence and others. Firm controls include: size, sector, region, unionpresence. See Table13 for the complete list of controls.

20In a more general framework workplace practices could be regarded as a choice variable on the part of theemployer. Empirical evidence on the determinants of the adoption of innovative practices by the firm see Lynch(2007), Osterman (1994), Wei, Freeman and Keliner (2011).

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able workers were more likely to be involved in innovative practices and wages and ability were

also positively correlated, the coefficients of workplace practices in the wage equation would be

upward biased21; likewise, if ability and commitment were related, for instance because more

able workers were ceteris paribus less strongly committed to the firm because they can count on

broader outside opportunities, then the coefficients of both workplace practices and the wage in

the commitment regression would be downward biased.

Therefore, let each error term be the sum of two components: ηi and χis where χis is a pure

error unrelated across equations and ηi is a component common to all equations capturing un-

observable individual characteristics; full recursiveness is then satisfied only if ηi is adequately

instrumented. In order to do this, I follow van Praag et al. (2003) and use the first principal

component of the estimated residuals from the subsystem of equations (7) to instrument the

common component in equations (8) and (9).

Since d is a vector of qualitative categorical variables, in order to allow for correlation across

errors of subsystem (7), I first transform the ordinal dependent variables into discrete variables

ranging on the real axis as suggested by Terza (1987)22 and then apply Zellner’s seemingly

unrelated estimator. Finally, using factor analysis, I compute the first principal component of

the SUR error covariance matrix and use it as an additional regressor in equations (8) and

(9); the wage and commitment equations can then be estimated separately by OLS and or-

dered probit, respectively. This procedure takes care of the endogeneity bias in the wage and

commitment equations. Notice that in the wage and commitment regressions, the use of the

Terza-transformed job attributes in place of the original ordinal variables avoids including, for

each job attribute, a number of dummies equals to the number of categories minus 1, thus also

helping the interpretation of the results.

21In the wage equation unobserved ability is also expected to bias the coefficients of job attributes: if moreable workers use their endowment to obtain both a better quality job and a higher wage, then the ’price’ of jobamenities will be downward biased (Hwang, Reed and Hubbard, 1992; Helliwell and Huang, 2005).

22Terza (1987)’s suggested transformation replaces each category j of an ordinal variable by Φj where Φj =E(ϕj |θj−1 < ϕj ≤ θj) and θj are the (maximum likelihood) normal quintile values of the percentages of thesample observed in category j. See also van Praag et al., 2003 for similar considerations.

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5 Results

Tables 3 and 4 present the estimated model. The SUR estimates23 of the sub-system (7) are

reported in Table 3; they show the extent to which innovative practices are related to the quality

of the employee’s working conditions. It turns out that innovative practices differ substantially

in this respect. Being involved in joint meetings and using suggestions is positively related to job

autonomy and discretion and negatively to job repetitiveness; joint meetings are also negatively

associated with the strictness of supervision, with effort intensity and exhaustion, thus resulting

as the practice that most of all is associated with good job quality. The teams’ latitudes in

deciding tasks and managing the group also imply greater empowerment although the extent of

job autonomy declines when teams are responsible for the output produced; likewise, strictness

of supervision, effort intensity and exhaustion all increase when teams self direct the group, hint-

ing to the presence of adverse peers’ pressure effects (Barker, 1993; Adler et al., 1997; Harley

2001) and casting some doubts on the overall job enrichment of fully autonomous teams.24. The

existing evidence according to which risks of injuries and occupational illnesses increase with

some innovative practices is confirmed only for contingent monetary rewards (earn) which are

positively related to both effort intensity and the perceived frequency of accidents. Lean teams

(team) are also associated with poor intrinsic job content and with exhaustion and, similarly,

QC are positively related to exhaustion, intensity of effort, repetitiveness and reduced autonomy;

neither practice, however, is significantly associated with the perceived risk of injuries. Finally,

supervision, effort intensity and exhaustion are lower when firms comply with quality norms but

the employee’s job autonomy is only marginally higher in this case.

Table 4 reports the estimated wage and commitment equations. All regressions control for the

common error component, suitably instrumented as previously discussed. The relative wage25,

in column (1), is unrelated to most empowerment practices, the exceptions are task autonomous

23All estimations are weighted using the population weight provided in the dataset, ISFOL(2007).24On the whole, being member of a fully self managed team does not mean greater job autonomy: the sum of

the coefficients of team, task, group, resp and teampay is not statistically different from zero; the validity ofthe implicit assumption of negligible interaction effects is confirmed by including a dummy for fully autonomousteams in the regressions.

25Following Clark and Oswald (1996), the log of the relative wage is defined as the difference between theindividual log wage and a reference log wage defined as the fitted values of the log wage on the following variablesand controls: monthly hours of work, age, age squared, years of experience, years of tenure, education dummies,fulltime job dummy, permanent job dummy, skill level dummies, gender dummy, dummy for workplace located inthe south, pension fund dummy, firm size dummies, region dummies, sector dummies, organizational are dummies,occupational dummies; see appendix for more details on the controls. On the concept of relative wage, its relevanceand its measurement see for example Clark and Oswald (1996).

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teamworking which rises the relative wage by 6% and output responsible teamworking which

lowers it by 4.5%; fully self directed teams are eventually unrelated to the relative wage26.

Contingent rewards significantly add to the wage only if monetized on the basis of individual

appraisals (earn): in this case the relative wage rises by 9%; on the contrary, the relative wage

declines by more than 3% when monetary rewards are based on the team performance or when

individual appraisals are used for training purposes (train).

Columns (2)-(5) show the commitment ordered probit estimates and the marginal effects of the

practices computed for the second largest category (category 6). Since the relative wage and

working conditions are controlled for, the estimated coefficient of each innovative practice is

indicative of the relevance of the latter on employees’ intrinsic motivation. Task autonomous

teamworking, joint meetings and QC enhance the intrinsic motivation of both value and strong

commitment; suggestions schemes have some positive relevance only for value commitment. On

the contrary, lean teams, output responsible teams and quality norms depress employees’ intrin-

sic motivation. The estimated coefficient for the relative wage, which is positive and statistically

significant only for strong commitment, suggests that λ, relative weight of intrinsic motivation

in the employee’s marginal benefit, is low when at stake is the decision of staying with the

organization and high when matters concern alignment with the firm’s values. Also contingent

pecuniary rewards bear only on strong commitment but they significantly crowd out intrinsic

motivation: the probability of a high strong commitment (category 6) declines by 1.3% if em-

ployees are individually appraised and by 2.1% if they receive a team performance-related pay.

These findings nicely accord with the psychological view according to which the remunerative

power of the organization can buy only a ’calculative’ type of commitment and may have poten-

tially negative effects on the intrinsic motivation (Etzioni, 1971). In order to obtain the overall

impact of each innovative practice on commitment and determine dΩ∗/dπ, the indirect effects

of the practices channeled to commitment via the wage and the working conditions, need also

be considered. This is done in the next section.

26The linear restriction (TEAM+TASK+GROUP+RESP=0) is not rejected by the data: F (1, 2889) = 0.16,Prob F = 0.69.

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5.1 Disentangling the motivational channels

In order to quantify the indirect effects of the practices, I estimate the reduced forms obtained

from equation (9) after substituting for working conditions, for the relative wage and for both.

Ωi = (α3 + β3A1)πi + γ3wi + (ϕ3 + β3Φ1)zi + u3i + β3u1i (10)

Ωi = (α3 + γ3α2)πi + (β3 + γ3β2)di + (ϕ3 + γ3ϕ2)zi + u3i + γ3u2i (11)

Ωi = (α3 + γ3α2 + γ3β2A1 + β3A1)πi + (ϕ3 + γ3ϕ2 + β3Φ1 + γ3β2Φ1)zi + u (12)

where u = u3i + γ3u2i + β3u1i + γ3β2u1i

The marginal effects of π computed from these reduced forms, compared with the marginal

effect obtained from equation (9), allow to distinguish the overall effect of each practice on

commitment into its three components: the intrinsic motivation effect α3, the total wage effect

γ3α2 + γ3β2A1 and the working conditions effect β3A1.

The three components and the total effects are shown in Table 5. Notice that the marginal

effects, again computed for category 6, are normalized to the frequency of the category in order

to be able to compare the role of each practice on the two types of commitment which have

different frequencies in the category of interest (29.6% for value commitment and 7.2% for strong

commitment). The ordered probit estimates and the marginal effects are reported in Tables (8)

and (9) in the Appendix. In Table 5 practices are ranked in descending order with respect to

their overall normalized marginal effects, and for ease of interpretation results for teamworking

are presented by type of teams.

dΩ∗/dπ is positive for all empowerment practices except for the two extreme types of teamwork-

ing: lean teams and fully self-managed teams and, limited to value commitment, for quality

norms. Receiving any type of contingent reward reduces strong commitment while only contin-

gent team premia reduce value commitment. With a few exceptions, the effect of the practices

on the intrinsic motivation drives the overall effect thus confirming that this is the main channel

activated by the innovative practices. The largest effects on the intrinsic motivation are found

on strong commitment and are conveyed by task autonomous teamworking, joint meeting and

QC which rise the probability of a high score by almost 50%. The same practices are also the

most effective ones on the intrinsic motivation of value commitment but their strength is com-

paratively lower in this case, rising the probability of a high score by 20% at most. If, as argued

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before, λ is smaller in strong commitment than in value commitment, these results suggest that

∂µ/∂π is relatively higher in strong commitment.

The indirect effects, either through the wage or the working conditions, are generally much

smaller in size. In particular, the indirect effects working through the job quality are mostly

negative on value commitment, a result driven in large part by the negative association between

team and working conditions and play only a marginal role on strong commitment. The indi-

rect effects conveyed by the wage partly counterbalance the intrinsic motivation effects on strong

commitment, and are again mostly negative while on value commitment they tend to reinforce

intrinsic motivation; in both cases they are relatively small.

Team performance related rewards reduce the probability of a high score in strong commitment

by 40%, thus ranking as the worst practice; a less disruptive role of contingent rewards is evi-

dent only when they are based on individual appraisals. This result, consistent with the idea

that employees’ morale might be particularly penalized when the individual effort cannot be

explicitly acknowledged, is further explored in the next section.

Table 12 in the appendix summarizes the results in a schematic way by classifying the practices

according to the signs of the three components determining the inequality (6) derived in section 2.

5.2 A further look at crowding out effects: commitment by education

In Benabou and Tirole (2003) crowding out effects are rationalized by the presence of asymmetric

information and the corresponding signal perceived by the less informed employee; specifically,

crowding out effects emerge when the principal has some information about the task or about

the worker himself that the worker does not have, and the principal’s gain from such a superior

information (the so-called sorting condition) is a bad news for the employee. When the signal

is, instead, favorable to the employee, the sorting condition works in the opposite direction and

the final outcome is one of crowding in. Similarly, Frey (1997) and Frey and Jegen (2001) ar-

gue that crowding out effects depend on the worker’s perception about the employer’s external

intervention; when it is regarded as controlling, crowding out effects are likely to arise; on the

contrary, when it is perceived as informative, crowding out effects do not arise or crowding in

may take place. The employee’s perception about the intervention is therefore a key element in

Frey (1997) as in Benabou and Tirole (2005).

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The commitment regressions presented in section 5 give credit to the idea that the contingency

of a reward and its monetization are relevant for crowding out to emerge and that the degree

of crowding out rises when rewards disregard individual efforts. In what follows the role of the

employee’s perception about the reward is further investigated.

The basic assumption is that simple and standard tasks should in principal be paid standard

rewards; a contingent pay in this case would then be regarded as a signal of some bad attributes

of the task, of which workers are not informed, or as a controlling device. On the contrary,

for more complex and distinctive tasks a performance related pay should be perceived as being

informative of the employees’ effort more than controlling. Thus, ceteris paribus, crowding out

effects should be more likely when contingent rewards are used to remunerate standard tasks and

less likely when associated with non standard jobs. In order to test this suggestion, the degree

of standardization of a task is supposed to be inversely related to the employee’s educational

attainment: the more standard tasks are expected to be performed by the less educated work-

ers, and the less standard tasks are expected to be performed by the more educated workers.

Specifically, I consider four levels of schooling: compulsory, vocational secondary (i.e. from 1 to

3 years of post-compulsory school), technical secondary (i.e. 5 years of post compulsory school)

and tertiary (i.e. undergraduate and graduate degrees) and I estimate the basic commitment

regressions for each of them.27.

Results are reported in Table 6. Crowding out effects are observed for workers with compul-

sory schooling; since tasks, in this case, are expected to be relatively standard, results support

the view that contingent rewards are perceived as a means of external control. However, since

crowding out effects are strongly associated with team-performance related rewards (teampay),

one could also argue that the type of reward per se is a negative reinforcer because of its mon-

itoring role and its likely uniformity across team members. Crowding out effects, however, do

not apply when the same reward is used for higher educated workers, thus indicating that they

cannot be related to the type of reward per se. Likewise, crowding in effects emerge when con-

tingent rewards based on individual appraisals are used for tertiary educated employees but the

same type of reward produces crowding out effects when used for less educated employees, again

suggesting that the sorting condition is favorable to highly educated workers. Non pecuniary

contingent rewards (train) also crowd out motivation when applied to low educated workers,

27Regressions by type of schooling are equivalent to saturating the previous model by allowing each regressorto have a different coefficient depending on the education attainment of the employee.

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presumably signalling bad task attributes. All these results accord with a use of contingent

rewards that rises with employees’ years of schooling, as observed in the descriptive statistics

(Table 1).

These regressions further confirm that the relative wage is a powerful motivator for compulsory

and vocational skill groups to remain attached to the firm but it is ineffective on the value

commitment across all educational groups; again, for given preferences, this implies that λ rises

with education, a result that accords with other findings for manual workers (see Lane, 1991

chapter 19, cited in Frey, 1997).

6 Conclusions

Innovative workplace practices are usually associated with high employees’ morale. This paper

has examined whether the higher organizational commitment associated with innovative work-

place practices is ascribable to a higher intrinsic motivation, which grants a higher effort for a

given remuneration and job quality, or to a higher extrinsic motivation, basically driven by a

higher pay.

The question has been tackled using a simple model according to which employees choose

organizational commitment in an optimal way by equating the marginal benefit and the marginal

cost of effort where the marginal benefit from commitment is a weighted average of intrinsic

motivation and the relative wage, and the marginal cost depends on the working conditions.

Innovative practices may change the marginal benefit by affecting employees’ intrinsic motivation

and/or by allowing higher pecuniary rewards, and may change the marginal cost of effort by

affecting the job quality.

Results show that empowerment practices that allow a substantial empowerment in terms

of greater job autonomy, greater discretion, reduced supervision and reduced repetitiveness, can

enhance both the sense of belonging and the attachment to the organization. Such practices,

like joint meetings and teamworking with latitude on tasks and procedures, affect commitment

mostly directly, that is by reinforcing employees’ intrinsic motivation, whereas their indirect

effects, which influence commitment through the wage and the job quality, are comparatively

smaller.

Results also show that employees tend to attach a relative low weight to intrinsic motivation

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in their marginal benefit functions, when they are concerned with decisions regarding their

attachment to the organization and a relatively high weight when considering their identification

with the firm’s values. Findings also indicate that the weight attached to intrinsic motivation

rises with employees’ educational attainment.

Contrary to the best empowerment practices, the relative wage helps retaining employees

but cannot affect their value commitment; moreover, pecuniary rewards if contingent on per-

formance, significantly crowd out intrinsic motivation, in accordance with existing experimental

results. These effects are particularly harmful on employees’ attachment to the firm and are only

partly compensated by the wage when rewards are contingent on the individual performance.

A deeper investigation into the crowding out effects supports the view that whether a contin-

gent reward determines crowding out or crowding in essentially depends on how it is perceived

by the employee. In particular, the findings indicate that the use of contingent rewards for

standard tasks is likely seen as a means of control or as a signal of bad task attributes, hence

crowds out intrinsic motivation. For more complex tasks, contingent rewards are not found to be

negative reinforcers and, if based on individual appraisals, raise employees’ intrinsic motivation

consistently with the idea that they are perceived as genuine signals of trust on the part of the

employer.

On the whole, this paper suggests that firms should invest in empowerment practices both be-

cause they are the sole instrument to increase their employees’ sense of identity, loyalty and share

of values and because they outperform the wage in retaining employees; contingent pecuniary

rewards, specially if based on the team performance, are, instead, unwise as they significantly

reduce employees’ attachment to the organization while leaving employees’ value commitment

unaffected. Self managed teams show mixed results on commitment, largely depending on the

extent of autonomy they are granted, but are always a mediocre practice when fully autonomous.

Finally, the empirical relevance of innovative practices differs greatly across educational

groups, suggesting that specific practices may complement specific skills, a result which deserves

further investigation.

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Zwick T. (2004) Employee Participation and Productivity. Labour Economics 11(6), 715-40.

27

Page 29: Employees’ motivation and high performance workplace practices

Table 1: Share of employees by workplace practices and educational attainments

All employees Compulsory Vocational Technical Tertiary

empowerment practices

SUGGEST 0.71 0.58 0.65 0.75 0.86MEET 0.56 0.38 0.45 0.62 0.78TEAM 0.47 0.49 0.43 0.46 0.49QUALITY 0.43 0.34 0.37 0.46 0.52TASK 0.38 0.36 0.36 0.38 0.45RESP 0.33 0.33 0.33 0.32 0.38GROUP 0.26 0.24 0.29 0.25 0.33QC 0.09 0.07 0.09 0.09 0.12

contingent rewards

EARN 0.13 0.06 0.06 0.15 0.29TEAMPAY 0.08 0.05 0.07 0.09 0.14

TRAIN 0.10 0.08 0.08 0.10 0.19

nr. observations 3605 878 538 1709 480

Notes: Compulsory: 10 years of schooling; vocational secondary: 1 to 3 years of post-compulsory school; technical secondary: 5 years of post compulsory school; tertiary: under-graduate and graduate degrees.

Table 2: Differences in organizational commitment between employees involved and employees notinvolved.

By workplace practices

(1) (2) (3) (4) (5) (6) (7) (8) (9)value comm strong comm inspires proud share values loyal work harder any job no quit

empowerment practices

SUGGEST 0.46** 0.06 0.30** 0.42** 0.35** 0.64** 0.50** -0.12** 0.22**MEET 0.35** 0.10** 0.27** 0.38** 0.24** 0.46** 0.41** -0.07 0.26**QC 0.30** 0.13 0.19** 0.33** 0.21** 0.36** 0.40** -0.03 0.23**QUALITY 0.05 -0.01 0.01 0.10** -0.03 0.07 0.12** -0.11** 0.05TEAM 0.00 0.02 -0.09* 0.04 -0.08* 0.13** 0.10** 0.04 -0.02TASK 0.10** 0.01 0.02 0.12** 0.03 0.19** 0.20** 0.00 0.01GROUP 0.04 -0.05 0.02 0.01 0.02 0.07 0.13** -0.07 -0.06RESP 0.04 -0.06 -0.04 0.02 -0.01 0.13** 0.16** -0.05 -0.08

contingent rewards

TEAMPAY 0.12* -0.02 -0.02 0.20** 0.03 0.23** 0.16* -0.15 0.07EARN 0.20** 0.03 0.18** 0.32** 0.16** 0.23** 0.24** -0.08 0.12

TRAIN 0.20** 0.03 0.20** 0.26** 0.15** 0.28** 0.23** -0.05 0.10

Notes: Number of observations: 3605. **Significant at the 5% level or less *Significant atthe 10 % level

Page 30: Employees’ motivation and high performance workplace practices

Table 3: Overall working conditions

Physical working conditions Job security Job contentaccidents exhaustion effort prob. repetitiveness supervision discretion autonomy

intensity unemployment(1) (2) (3) (4) (5) (6) (7) (8)

empowerment practices

SUGGEST 0.130 0.151 0.083 –0.168*** –0.375*** –0.089 0.401*** 0.418***(0.13) (0.10) (0.05) (0.05) (0.11) (0.06) (0.05) (0.07)

MEET 0.089 –0.409*** –0.191*** –0.006 –0.429*** –0.152** 0.150*** 0.279***(0.13) (0.10) (0.05) (0.05) (0.11) (0.06) (0.05) (0.07)

QC 0.014 0.393** 0.074 0.162* 0.361** –0.057 0.038 –0.364***(0.20) (0.15) (0.09) (0.08) (0.18) (0.10) (0.09) (0.11)

QUALITY –0.176 –0.313*** –0.184*** –0.089* 0.123 –0.188*** 0.051 0.121*(0.12) (0.09) (0.05) (0.05) (0.11) (0.06) (0.05) (0.06)

TEAM 0.173 0.423** 0.077 –0.098 0.548*** –0.025 –0.313*** –0.537***(0.21) (0.16) (0.09) (0.09) (0.19) (0.10) (0.09) (0.11)

TASK 0.268 –0.513*** –0.206** 0.222** –0.381* –0.097 0.241** 0.331***(0.24) (0.19) (0.10) (0.10) (0.21) (0.11) (0.10) (0.13)

GROUP –0.230 0.429** 0.269*** 0.082 –0.181 0.308*** 0.180* 0.573***(0.22) (0.17) (0.09) (0.09) (0.19) (0.11) (0.10) (0.12)

RESP 0.313 0.042 0.108 –0.010 0.072 –0.134 0.010 –0.296***(0.22) (0.17) (0.09) (0.09) (0.19) (0.10) (0.09) (0.11)

contingent rewards

TEAMPAY –0.120 –0.643*** –0.100 –0.346*** –0.012 0.198* –0.069 –0.126(0.23) (0.18) (0.10) (0.10) (0.20) (0.11) (0.10) (0.12)

EARN 0.718*** –0.075 0.244*** –0.112 –0.765*** 0.013 –0.002 –0.105(0.22) (0.17) (0.09) (0.09) (0.19) (0.10) (0.09) (0.12)

TRAIN –0.174 –0.039 –0.089 –0.059 –0.027 0.046 0.156 0.098(0.22) (0.17) (0.09) (0.09) (0.19) (0.10) (0.10) (0.12)

constant –2.090 –6.208*** –2.276*** 0.217 –0.002 0.687 –2.072*** –2.828***(1.28) (0.98) (0.54) (0.53) (1.12) (0.61) (0.55) (0.67)

indiv. controls Yes Yes Yes Yes Yes Yes Yes Yeswrkpl-firm dum Yes Yes Yes Yes Yes Yes Yes Yes21 region dum Yes Yes Yes Yes Yes Yes Yes Yes40 sector dum Yes Yes Yes Yes Yes Yes Yes Yes8 occup dum Yes Yes Yes Yes Yes Yes Yes Yes10 org dum Yes Yes Yes Yes Yes Yes Yes YesR sq. 0.341 0.152 0.138 0.199 0.164 0.127 0.318 0.255

Notes: Standard errors in parenthesis; ***Significant at the 1% level **Significant at the 5% level *Significant at the 10 % levelSUR estimates. Number of observations: 3529 (due to missing values in the sector dummies). Breusch-Pagan test of independence: chi2(28) = 1805.265, Pr= 0.0000. See Appendix for the list of controls

29

Page 31: Employees’ motivation and high performance workplace practices

Table 4: Wage and commitment

Wage Strong commitment Value commitmentOLS ordered prob. marg.eff. ordered prob. marg.eff.(1) (2) (3) (4) (5)

empowerment practices

SUGGEST 0.009 0.052 0.005 0.124* 0.032(0.02) (0.08) (0.08)

MEET 0.015 0.336*** 0.033 0.180*** 0.047(0.01) (0.05) (0.05)

QC 0.015 0.288*** 0.031 0.234*** 0.061(0.02) (0.08) (0.08)

QUALITY 0.007 –0.014 -0.001 –0.184*** -0.048(0.01) (0.05) (0.05)

TEAM –0.014 –0.170** -0.016 –0.127 -0.033(0.02) (0.09) (0.09)

TASK 0.061*** 0.409*** 0.050 0.352*** 0.092(0.02) (0.10) (0.10)

GROUP –0.011 –0.018 -0.002 –0.129 -0.034(0.02) (0.10) (0.10)

RESP –0.045** –0.301*** -0.027 –0.140 -0.037(0.02) (0.09) (0.09)

contingent rewards

TEAMPAY –0.037* –0.257*** -0.021 –0.081 -0.021(0.02) (0.10) (0.10)

EARN 0.090*** –0.149* -0.013 0.022 0.006(0.02) (0.09) (0.09)

TRAIN –0.038* 0.015 0.001 0.114 0.030(0.02) (0.09) (0.09)

relative wage

w 0.193** 0.018 0.039 0.010(0.08) (0.08)

job attributes

accidents 0.003* –0.007 0.001(0.00) (0.01) (0.01)

exhaustion –0.001 –0.030** 0.027**(0.00) (0.01) (0.01)

effort intensity –0.004 –0.051** –0.039*(0.01) (0.02) (0.02)

prob.unemployment –0.002 –0.019 –0.149***(0.00) (0.02) (0.02)

repetitiveness –0.004* –0.008 –0.043***(0.00) (0.01) (0.01)

supervision 0.005 0.036 –0.004(0.01) (0.02) (0.03)

discretion –0.014 0.035 0.187***(0.01) (0.05) (0.05)

autonomy –0.006 –0.066 0.111**(0.01) (0.04) (0.04)

instrument for η 0.098** 0.275 –0.428**(0.05) (0.20) (0.21)

constant 0.047(0.12)

indiv. controls Yes Yes Yeswrkpl-firm dum Yes Yes Yes21 region dum Yes Yes Yes40 sector dum Yes Yes Yes10 org dum Yes Yes Yes8 soc dum Yes Yes YesR sq.N 3016 3016 3016

Notes: Standard errors in parenthesis; ***Significant at the 1% level **Significant at the 5% level *Significant at the 10 % level.The marginal effects are computed for category 6; bold numbers indicate statistical significance at 10% or less. The cut points of theordered probits are not shown for reasons of space. See Appendix for the list of controls. The instrument for η is the first factor obtainedfrom the factor analysis performed on the SUR residuals using the principal factor method; it explains a proportion of 0.98 of the variance.Number of observations are 3016 due to missing values in the wage and the sector dummies.

30

Page 32: Employees’ motivation and high performance workplace practices

Table5:Normalized

marginal

effects

ofem

pow

ermentpractices

andcontingentrewardson

commitment.

Directan

dindirecteff

ects

Strong

Commitment

ValueCommitment

Intrinsic

Wage

Working

Tota

lIntrinsic

Wage

Working

Tota

lmotivation

conditions

Motivation

conditions

(1)

(2)

(3)

(4)

(1)

(2)

(3)

(4)

em

powerm

entpractices

em

powerm

entpractices

TEAM+TASK

0.477

-0.033

0.008

0.451

SUGGEST

0.110

0.023

0.129

0.262

MEET

0.451

-0.028

0.012

0.436

MEET

0.159

0.004

0.063

0.226

QC

0.435

-0.092

0.005

0.347

TEAM+TASK

0.197

0.071

-0.066

0.202

TEAM+TASK+GROUP

0.453

-0.107

-0.045

0.301

TEAM+TASK+RESP

0.073

0.090

-0.064

0.100

TEAM+TASK+RESP

0.102

-0.001

0.015

0.115

QC

0.206

-0.047

-0.067

0.092

QUALIT

Y-0.019

0.066

0.013

0.060

TEAM+TASK+GROUP

0.083

-0.053

-0.008

0.022

SUGGEST

0.069

-0.012

-0.029

0.028

SELFTEAM

-0.041

-0.033

-0.006

-0.081

SELFTEAM

0.078

-0.075

-0.037

-0.035

QUALIT

Y-0.163

0.015

0.035

-0.112

TEAM

-0.222

0.146

-0.007

-0.083

TEAM

-0.112

0.078

-0.120

-0.155

average

emp.practices

0.203

-0.015

-0.007

0.180

average

emp.practices

0.057

0.016

-0.011

0.062

contingentrewards

contingentrewards

EARN

-0.182

0.129

0.016

-0.038

APP

EARN

0.020

0.062

0.029

0.111

TEAMPAY

-0.295

-0.135

0.039

-0.392

TEAMPAY

-0.072

-0.016

0.008

-0.080

average

cont.

monetary

rew.

-0.239

-0.003

0.027

-0.215

average

cont.

monetary

rew.

-0.026

0.023

0.018

0.015

TRAIN

0.020

-0.089

0.005

-0.065

APP

TRAIN

0.101

0.005

0.038

0.145

Notes:

Thenorm

alized

marg

inaleffects

reported

inth

eTable

are

obta

ined

asth

era

tiobetw

een

them

arg

inaleffects

(dy/dx),

com

pute

dforcate

gory

6,and

thefrequency

ofth

ecate

gory

.The

norm

alization

iscom

pute

din

ord

erto

com

pare

the

effects

ofth

epra

cticesacro

ssty

pe

ofcom

mitm

ents;th

efrequency

ofcate

gory

6is

29.6%

for

valu

ecom

mitmentand

7.2%

forstro

ngcom

mitment.

Totalis

thesu

mofth

epre

viousth

reecolu

mns.

Them

arg

inaleffects

use

din

col.(1

)are

obta

ined

from

them

arg

inal

effects

ofequation

( 9)and

reported

incolu

mn

1ofTable

9in

the

appendix;th

em

arg

inaleffectuse

din

col.(2

)are

obta

ined

from

the

diff

ere

nce

betw

een

the

marg

inal

effectofequation

( 12)and

those

ofequation

(10);

noticeth

atth

ewagein

directeffects

also

inclu

deth

einte

racte

dwage-w

ork

ing

conditionseffects.Them

arg

inaleffects

use

din

col.(3

)are

obta

ined

from

thediff

ere

ncebetw

een

themarg

inaleffects

ofequation

(10)and

those

ofequation

(9).

All

marg

inaleffects

are

reported

inTable9

inth

eappendix.SELFTEAM

corresp

ondsto

TEAM

+TASK+GROUP+RESP.

31

Page 33: Employees’ motivation and high performance workplace practices

Table6:Com

mitmentbyed

ucation

.Ordered

probit

Strongco

mmitmen

tValueco

mmitmen

t(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

compulsory

voca

tional

tech

nical

tertiary

compulsory

voca

tional

tech

nical

tertiary

em

powerm

entpractices

SUGGEST

0.037

0.108

–0.099

–0.010

0.187

0.098

0.071

0.547**

(0.11)

(0.15)

(0.08)

(0.24)

(0.12)

(0.16)

(0.08)

(0.25)

MEET

0.483***

0.302**

0.098

–0.213

0.351***

0.187

–0.076

0.013

(0.11)

(0.14)

(0.07)

(0.23)

(0.11)

(0.15)

(0.07)

(0.24)

QC

0.729***

0.228

0.089

0.011

0.181

–0.069

0.460***

–0.431

(0.19)

(0.23)

(0.11)

(0.30)

(0.19)

(0.23)

(0.11)

(0.31)

QUALIT

Y–0.021

0.042

–0.066

–0.496***

–0.439***

0.389***

–0.191***

–0.089

(0.10)

(0.14)

(0.06)

(0.18)

(0.11)

(0.15)

(0.07)

(0.19)

TEAM

–0.466***

0.268

–0.063

–0.695

–0.153

–0.173

–0.057

–0.046

(0.17)

(0.26)

(0.13)

(0.51)

(0.17)

(0.27)

(0.13)

(0.51)

TASK

0.350*

0.122

0.400***

1.073**

0.233

0.421

0.229

0.598

(0.20)

(0.29)

(0.15)

(0.53)

(0.20)

(0.29)

(0.15)

(0.54)

GROUP

0.228

–0.723***

0.273*

–0.805**

–0.142

–0.278

0.053

–0.003

(0.19)

(0.27)

(0.14)

(0.34)

(0.20)

(0.28)

(0.14)

(0.35)

RESP

–0.062

0.055

–0.538***

0.571

0.190

–0.154

–0.407***

–0.277

(0.19)

(0.27)

(0.13)

(0.37)

(0.19)

(0.28)

(0.13)

(0.39)

contingentrewards

TEAMPAY

–0.854***

0.208

–0.166

0.097

–0.552**

–0.002

0.143

0.120

(0.25)

(0.27)

(0.13)

(0.30)

(0.25)

(0.28)

(0.13)

(0.32)

EARN

–0.189

0.143

–0.206*

0.269

0.275

–0.403

–0.088

0.422*

(0.23)

(0.25)

(0.12)

(0.21)

(0.24)

(0.26)

(0.12)

(0.22)

TRAIN

–0.539**

–0.498**

0.391***

0.043

–0.273

–0.155

0.442***

0.175

(0.22)

(0.24)

(0.12)

(0.23)

(0.22)

(0.25)

(0.13)

(0.24)

relativewage

w0.323*

0.920***

–0.039

0.078

0.079

0.051

0.149

–0.194

(0.18)

(0.22)

(0.13)

(0.30)

(0.18)

(0.23)

(0.14)

(0.31)

jobattributes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

oth

erco

nts

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

wrkpl-firm

dum

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

sectordum

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

org

dum

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

N751

462

1449

354

751

462

1449

354

Notes:Standard

errors

inparenthesis;***Significantatthe1%

level

**Significantatthe5%

level

*Significantatthe10%

level;seealsoNotesto

Table

4.

32

Page 34: Employees’ motivation and high performance workplace practices

A Appendix

Page 35: Employees’ motivation and high performance workplace practices

Table 7: Types of teams

task output group task auto & output resp & task & group fully leanautonomous responsible autonomous output resp group auto autonomous autonomous

TEAM 1 1 1 1 1 1 1 1TASK 1 0 0 1 0 1 1 0RESP 0 1 0 1 1 0 1 0GROUP 0 0 1 0 1 1 1 0nr. employees 245 102 10 203 7 45 802 184% of total employees 6.80 2.83 0.28 5.63 0.19 1.25 22.25 5.10% of team-workers 14.53 6.05 0.59 12.04 0.42 2.67 47.57 10.91

34

Page 36: Employees’ motivation and high performance workplace practices

Table 8: Estimated reduced forms of commitment equations

Strong commitment Value commitment

(1) (2) (3) (4) (5) (6)empowerment practices

SUGGEST –0.014 0.030 0.019 0.151*** 0.274*** 0.300***(0.05) (0.05) (0.04) (0.05) (0.05) (0.04)

QC 0.238*** 0.287*** 0.217*** 0.174** 0.160** 0.106(0.07) (0.08) (0.07) (0.07) (0.08) (0.07)

MEET 0.273*** 0.340*** 0.297*** 0.189*** 0.255*** 0.259***(0.05) (0.05) (0.04) (0.05) (0.05) (0.05)

QUALITY 0.028 –0.004 0.041 –0.168*** –0.146*** –0.128***(0.04) (0.05) (0.04) (0.04) (0.05) (0.04)

TEAM –0.022 –0.172** –0.057 –0.063 –0.267*** –0.177**(0.08) (0.08) (0.07) (0.08) (0.09) (0.08)

TASK 0.330*** 0.492*** 0.350*** 0.362*** 0.423*** 0.415***(0.08) (0.10) (0.08) (0.09) (0.10) (0.09)

GROUP –0.102 –0.058 –0.106 –0.292*** –0.065 –0.205***(0.08) (0.09) (0.08) (0.08) (0.09) (0.08)

RESP –0.241*** –0.290*** –0.241*** –0.085 –0.140 –0.117(0.08) (0.09) (0.08) (0.08) (0.09) (0.08)

contingent rewards

TEAMPAY –0.354*** –0.214** –0.318*** –0.109 –0.073 –0.090(0.08) (0.09) (0.08) (0.08) (0.10) (0.08)

EARN –0.036 –0.132 –0.026 0.109 0.055 0.127(0.08) (0.08) (0.08) (0.08) (0.09) (0.08)

TRAIN –0.066 0.018 –0.045 0.120 0.160* 0.167**(0.08) (0.08) (0.08) (0.08) (0.09) (0.08)

relative wage

w 0.185** 0.056(0.08) (0.08)

job attributes

accidents –0.004 –0.001(0.01) (0.01)

exhaustion –0.024** 0.014(0.01) (0.01)

effort intensity –0.030 –0.033*(0.02) (0.02)

prob unemployemnt –0.046*** –0.142***(0.02) (0.02)

repetitiveness –0.015* –0.040***(0.01) (0.01)

supervision 0.021 –0.017(0.02) (0.02)

discretion 0.083** 0.182***(0.03) (0.04)

autonomy –0.012 0.107***(0.03) (0.03)

instrument for η 0.045 0.133*** –0.401*** 0.207***(0.14) (0.03) (0.14) (0.03)

indiv conts Yes Yes Yes Yes Yes Yeswrkpl-firm dum Yes Yes Yes Yes Yes Yes21 region dum Yes Yes Yes Yes Yes Yes40 sector dum Yes Yes Yes Yes Yes Yes10 org dum Yes Yes Yes Yes Yes Yes8 soc dum Yes Yes Yes Yes Yes YesR sq.N 3529 3016 3529 3529 3016 3529

Notes: Standard errors in parenthesis; ***Significant at the 1% level **Significant at the 5% level *Significant at the 10 % level.Ordered Probit estimates. The cut points of the ordered probits are not shown for reasons of space. See Appendix for the list of controls.The instrument for η is the first factor obtained from the factor analysis performed on the SUR residuals using the principal factormethod; it explains a proportion of 0.94 of the variance.

35

Page 37: Employees’ motivation and high performance workplace practices

Table 9: Marginal effects from the structural and the reduced form models

Strong commitment Value commitment(1) (2) (3) (4) (1) (2) (3) (4)

practices

SUGGEST 0.005 -0.001 0.003 0.002 0.032 0.040 0.071 0.078MEET 0.033 0.028 0.033 0.031 0.047 0.050 0.066 0.067QC 0.031 0.027 0.032 0.025 0.061 0.046 0.041 0.027QUALITY -0.001 0.003 0.000 0.004 -0.048 -0.045 -0.038 -0.033TEAM -0.016 -0.002 -0.016 -0.006 -0.033 -0.017 -0.069 -0.046TASK 0.050 0.036 0.051 0.038 0.092 0.095 0.108 0.106GROUP -0.002 -0.010 -0.006 -0.011 -0.034 -0.077 -0.017 -0.053RESP -0.027 -0.024 -0.026 -0.024 -0.037 -0.023 -0.036 -0.030contingent rewardsTEAMPAY -0.021 -0.030 -0.018 -0.028 -0.021 -0.029 -0.019 -0.024EARN -0.013 -0.004 -0.012 -0.003 0.006 0.029 0.014 0.033TRAIN 0.001 -0.007 0.002 -0.005 0.030 0.032 0.041 0.043relative wagew 0.018 0.018 0.010 0.014

Notes: Columns 1 show the marginal effects from equation (9) in the text; columns 2 show themarginal effects after substituting for the wage, corresponding to equation (11) in the text; columns3 show the marginal effects after substituting for working conditions corresponding to equation (10)in the text; columns 4 show the marginal effects after substituting for both the wage and workingconditions, corresponding to equation (12) in the text. Bold coefficients are significant at least at10%. Recall that value and strong commitment are 1-7 categorical variables; the marginal effectsare relative to category 6; the frequency of value commitment in category 6 is 29.6% whereas thefrequency of strong commitment in the same category is 7.2%.

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Table 10: The wage regression by educational attainments

compulsory vocational technical tertiary(1) (2) (3) (4)

empowerment practices

SUGGEST –0.019 –0.075** 0.016 0.047(0.03) (0.04) (0.02) (0.05)

MEET –0.073*** 0.024 0.061*** –0.094**(0.02) (0.03) (0.02) (0.04)

QC 0.036 –0.024 0.001 –0.001(0.04) (0.05) (0.02) (0.06)

QUALITY 0.027 0.014 0.005 –0.069*(0.02) (0.03) (0.01) (0.04)

TEAM 0.017 0.019 –0.073*** –0.132(0.04) (0.06) (0.03) (0.10)

TASK –0.050 0.144** 0.070** 0.007(0.04) (0.07) (0.03) (0.10)

GROUP 0.069 –0.211*** 0.020 –0.119*(0.04) (0.06) (0.03) (0.07)

RESP –0.095** 0.017 0.005 0.181**(0.04) (0.06) (0.03) (0.07)

contingent rewards

TEAMPAY –0.042 –0.013 0.013 –0.009(0.06) (0.06) (0.03) (0.06)

EARN 0.169*** 0.118** 0.018 0.115***(0.05) (0.06) (0.02) (0.04)

TRAIN –0.107** 0.013 –0.010 –0.023(0.05) (0.06) (0.03) (0.04)

job attributes

accidents 0.005* 0.014*** –0.001 0.006(0.00) (0.00) (0.00) (0.01)

exhaustion 0.009* 0.020*** –0.005 –0.004(0.01) (0.01) (0.00) (0.01)

effort intensity –0.010 0.034** 0.002 0.020(0.01) (0.01) (0.01) (0.01)

prob unemployement –0.011 –0.008 –0.012** –0.004(0.01) (0.01) (0.01) (0.01)

repetitiveness –0.011*** –0.006 –0.001 –0.016*(0.00) (0.01) (0.00) (0.01)

supervision –0.012 0.006 –0.007 0.004(0.01) (0.02) (0.01) (0.01)

discretion 0.023 0.008 –0.001 0.088***(0.02) (0.02) (0.01) (0.03)

autonomy 0.017 0.044** –0.004 –0.001(0.01) (0.02) (0.01) (0.02)

instrument for η –0.036 –0.050 0.041 –0.031(0.06) (0.09) (0.04) (0.08)

constant 5.324*** 6.221*** 4.929*** 6.086***(0.24) (0.35) (0.16) (0.42)

oother conts Yes Yes Yes Yeswrkpl-firm dum Yes Yes Yes Yessector dum Yes Yes Yes Yesorg dum Yes Yes Yes YesR sq. 0.632 0.553 0.639 0.831N 751 462 1449 354

Notes: Standard errors in parenthesis; ***Significant at the 1% level **Significant at the5% level *Significant at the 10% level. See Appendix for list of controls and Notes to Table4.

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Table 11: Values of λ to satisfy dΩ∗/dπ > 0.

Intrinsic motivation Total Wage Working condition Values of λ (λ > 0) Notes∂µ/∂π dw/dπ ∂d/∂π for dΩ∗/dπ > 0a3 ∆ a1

+ + + for all λ+ + – λ > (b3|a1| −∆)/(a3 −∆) for all λ if a3 > ∆ > b3|a1|

for no λ if a3 < ∆ < b3|a1|+ – + λ > (|∆| − b3a1)/(a3 + |∆|) for all λ if |∆| < b3a1+ – – λ > (|∆|+ b3a1)/(a3 + |∆|) for sufficiently large λ– + + λ < (∆ + b3a1)/(|a3|+∆) for sufficiently small λ– + – λ < (∆− b3|a1|)/(|a3|+∆) for no λ if ∆ < b3|a1|– – + λ < (b3a1 − |∆|)/(|a3|+ |∆|) for no λ if |∆| > b3a1– – – for no λ

Notes: For convenience we let: a3 = ∂µ/∂π, ∆ = dw/dπ, a1 = ∂d/∂π .

Table 12: Classification of practices according to their estimated marginal effects.

Sign of the marginal effect on:Intrinsic motivation Total Wage Working conditions Strong Commitment Value Commitment

α3 γ3α2 + γ3β2A1 β3A1

+ + + SUGG, MEET, TRAIN

+ + – TEAM+TASK, TEAM+RESP

+ – + TEAM+TASK, MEET, QC,TEAM+TASK+RESP, TRAIN

+ – – TEAM+TASK+GROUP, SUGG, SELFTEAM QC

– + + QUALITY, EARN QUALITY

– + – TEAM TEAM

– – + TEAMPAY TEAMPAY

– – – SELFTEAM

Notes: Practices are classified according to their estimated effects shown in Table 5. Boldtypeface indicate that the overall effect on commitment is positive.

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Table 13: List of controls included in regressions

individual controls: firm and workplace controls:

female workplace located in the Southage union presenceage squared job prevalent femaleexperience job prevalent maletenure wrkp size dummy2 (5 to 15)high school vocational wrkp size dummy3 (15 to 50)high school technical wrkp size dummy4 (more than 50)high school university firm size dummy2 (15 to 100)master/doctorate firm size dummy3 (100 to 500)first degree firm size dummy4 (more than 500)union member 40 sector dummiesfull time job 21 region dummiespermanent job

commuting cost%

pension/insurance schemeovereducation*extent of pc useskill levelshift worksupervisorchild dummychild below 6 yrs dummymarrieddivorcednr. childmother marriedmother not married8 occupational dummies17 organizational area dummies

*Overeducation is given by the difference between the actual level of education and the respondent’sassessment of the education level actually needed to cover the position she holds: positive values indicate excesseducation, negative value indicate an educational deficit.%Commuting cost is computed on the basis of the distance between the county town of the workplacelocation and the county town of residence and imputing the estimated cost of motoring.

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