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Incentives in the Public Sector: Evidence from a Government Agency

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Publication details

JournalThe Economic Journal
DateAccepted/In press - 20 Jan 2016
DateE-pub ahead of print - 24 Oct 2017
DatePublished (current) - Oct 2017
Issue number605
Number of pages25
Pages (from-to)F117-F141
Early online date24/10/17
Original languageEnglish


We study the impact of team-based performance pay in a major UK government agency, the public employment service. The scheme covered quantity and quality targets, measured with varying degrees of precision. We use unique data from the agency’s performance management system and personnel records, linked to local labour market data. We show that on average the scheme had no significant effect but had a substantial positive effect in small teams, fitting an explanation combining free riding and peer monitoring. We also show that the impact was greater on better-measured quantity outcomes than quality outcomes. The scheme was very cost effective in small offices.

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©2017 Royal Economic Society. Published by John Wiley & Sons.This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details

    Research areas

  • Incentives, Public Sector, Teams, Performance, Personnel Economics

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