The Tenuous Relationship between Effort and Performance Pay

When a worker is offered performance related pay, the incentive effect is not only determined by the shape of the incentive contract, but also by the probability of contract enforcement. We show that weaker enforcement may reduce the worker's effort, but lead to higher-powered incentive contracts. This creates a seemingly negative relationship between effort and performance pay.

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Year of publication:	2012-06-29
Authors:	Kvaløy, Ola ; Olsen, Trond E.
Institutions:	Institutt for foretaksøkonomi, Norges Handelshøyskole (NHH)
Subject:	Effort \| performance pay \| incentive contract

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Extent:	application/pdf
Series:	Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series Discussion Papers Number 2012/8 28 pages
Classification:	J30 - Wages, Compensation, and Labor Costs. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011098238