I NCENTIVES ARE the essence of economics. Despite many wide-ranging claims about their supposed importance, there has been little empirical assessment of incentive provision for workers. The purpose of this paper is to critically overview existing work on the provision of incentives. Since the interests of workers and their employers are not always aligned, a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm's interest. This literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers. These include piece rates, options, discretionary bonuses, promotions, profit sharing, efficiency wages, deferred compensation, and so on. My objective here is to evaluate this literature in the light of a growing empirical literature on compensation. Where possible, I will address the literature from two perspectives. First, an underlying assumption of this literature is that individuals respond to contracts that reward performance. Accordingly, I consider whether agents behave in this way, and whether these responses are always in the firm's interest. Second, I address whether firms write contracts with these responses in mind. In other words, do contracts look like the predictions of the theory? Incentives are provided to workers

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The Provision of Incentives in Firms

China's economic reforms have resulted in spectacular growth and poverty reduction. However, China's institutions look ill-suited to achieve such a result, and they indeed suffer from serious shortcomings. To solve the "China puzzle," this paper analyzes China's institution—a regionally decentralized authoritarian system. The central government has control over personnel, whereas subnational governments run the bulk of the economy; and they initiate, negotiate, implement, divert, and resist reforms, policies, rules, and laws. China's reform trajectories have been shaped by regional decentralization. Spectacular performance on the one hand and grave problems on the other hand are all determined by this governance structure. ( JEL O17, O18, O43, P21, P25, P26)

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The Fundamental Institutions of China's Reforms and Development

Land policies are of fundamental importance to sustainable growth, good governance, and the well-being of, and the economic opportunities open to, both rural and urban dwellers - particularly the poor. To this end, research on land policy, and analysis of interventions related to the subject, have long been of interest to the Bank's Research Department, and other academic, and civil society institutions. The report aims to strengthen the effectiveness of land policy in support of development, and poverty reduction, by setting out the results of recent research in a way that is accessible to a wide audience of policymakers, nongovernmental organizations, academics in the Bank's client countries, donor agency officials, and the broader development community. Its main message rests on three principles: 1) provision of secure tenure to land improves the welfare of the poor, particularly by enhancing the asset base of those whose land rights are often neglected, and, creates incentives needed for investment, paramount to sustainable economic growth; 2) facilitation of land exchange, and distribution, whether as an asset or for current services, at low cost, through markets, and non-market channels, will expedite land access by productive, but land-poor producers, so that once economic growth improves, financial markets would rely on the use of land as collateral; and, 3) governments' contribution to the promotion of socially desirable land allocation, and utilization. The report discusses mechanisms to promote tenure security, demonstrates the importance of rental market transactions, arguing the removal of impediments to these can generate equity advantages, and positive investments. It also illustrates mechanisms, ranging from taxation, to regulation and land use planning to address these issues.

Land policies for growth and poverty reduction

This paper employs province-level panel data to assess the contributions of decollectivization, price adjustments, and other reforms to China's agricultural growth in the reform period. Decollectivization is found to improve total factor productivity and to account for about half of the output growth during 1978-84. The adjustment in state procurement prices also contributed positively to output growth. Its impact came mainly from the responses in input use. The effect of other market-related reforms on productivity and output growth was very small. Reasons for slowdown in agricultural growth after 1984 are also analyzed. Copyright 1992 by American Economic Association.

Rural Reforms and Agricultural Growth in China.

We survey the empirical literature analyzing the process of enterprise restructuring in transition economies. The survey provides new insights into the relative effectiveness of different reform policies, and into how this effectiveness varies across regions. We study the effects of privatization, the importance of different types of owners, the effects of foreign and domestic competition, the consequences of soft budgets, and the role of managerial incentives and managerial human capital, on enterprise restructuring.

https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=238716

Enterprise Restructuring in Transition: A Quantitative Survey

This paper presents a method for assessing the relative importance of price increases and strengthened individual incentives due to the introduction of the responsibility system for the post-1978 increase in China's agricultural productivity. Data on post-1978 Chinese agricultural performance suggest that a little over three-quarters of the measured productivity increase is due to payment system changes and the remainder to price increases. We also use our method to calculate incentive indices, giving an estimate of the fraction of their marginal product that peasants received under the pre-1978 regime.

https://www.jstor.org/stable/pdfplus/1832191.pdf

Lijing Zhu

Papers

The Impact of China's Economic Reforms on Agricultural Productivity Growth