This paper uses information from a panel of Dutch firms to investigate the labor productivity effects of performance related pay (PRP).We find that PRP increases labor productivity at the firm level with about 9%.

One important finding concerns the fact that job separations for older workers constitute mostly a one-way exit out of the labor force, despite the fact that an ageing society calls for an active labor market participation from us all. Also, the allocation of labor for younger workers has shown...