Abstract

In the recent debate, it has been suggested to strength the worker participation to the firm through flexible compensation systems. The linkage between compensations and firm performance is viewed as a tool for increasing firm efficiency and competitiveness. The economic theory suggests various "macro"- and "microeconomic" motivations behind the adoption of flexible compensation systems. While the macroeconomic motivations have been largely criticised (on theoretical and empirical grounds), the microeconomic explanations are now very popular, acquiring relevance also for policy makers. This note is focus on the microeconomic motivations and their empirical evidence, along with two different concepts of flexibility, "defensive" and "innovative" flexibility. The importance of distinguishing among a demand for "economic" participation vs. a demand for worker participation in the "decision-making" process within the firm is pointed out, together with some policy options aimed at sustaining the diffusion of flexible compensation systems.