The Complementary Effect of Organizational Practices and Workers’ Level of Education

Abstract

This paper investigates how rms' productivity is a ected by the relationship between organiza- tional practices and workers' level of education. Using rm-level panel data covering the period 2002 to 2008, I estimate complementarities among workers' level of education and a large set of organizational practices aggregated into three domains: decentralization, incentive pay, and work design where work design comprises job rotation and teamwork. I consider workers with four lev- els of education: no post-compulsory education, upper-secondary vocational education and train- ing, tertiary vocational education, and tertiary academic education. The results indicate that the complementarity between education and the extent of rms' decentralization is higher for tertiary- educated workers. In contrast, the estimations reveal no complementarity between incentive pay and higher levels of workers' education. Furthermore, complementarity exists between work design and tertiary-educated workers, especially workers with a tertiary vocational education. Finally, the estimations using an aggregate measure of organization suggest complementarities across organiza- tional practices.