We study voting over higher education finance in an economy with two regions and two separated labor markets. Households dffer in their financial endowment and their children's ability. Non-students are immobile. Students decide where to study; they return home after graduation with exogenous...

With respect to the labor market participation of the elderly in welfare states, the economic literature focuses on the incentives to the worker in the light of generous early retirement opportunities. The sociological literature on the other hand addresses the problem of low productivity of...

Using a simple symmetric principal-agent model of two banks, this paper studies the effects of both bailouts and bonus taxes on risk taking and managerial compensation. In contrast to existing literature, we assume financial institutions to be systemic only on a collective basis, implying...

We conduct a field experiment in a naturally occurring labor environment and track whether the performance of workers responds to unexpected wage increases. Specifically, we investigate how the timing of wage increases affects efforts. We find that workers performance is about 11% higher for the...

This study uses rich information on performance outcomes to estimate the effect of bonus pay on worker productivity. We use a policy discontinuity in the call centre of a multi-national telephone company in which management introduced monetary bonuses upon achieving pre-defined performance...

The possibility of adverse selection by training firms is common theoretical argument for company-sponsored investments in general skills. The paper derives a public and a private signal after apprenticeship training and shows that training firms are able to positively select graduates they...

Recent laboratory evidence suggests that employees who have the extraordinary right to self-determine their wages perform better. By conducting a natural field experiment, we aim to test whether this policy actually has the predicted positive effects in a real-labor market. Employees were hired...

Managers often use tournament incentive schemes which motivate workers to compete for the top, compete to avoid the bottom, or both. In this paper we test the effectiveness and efficiency of these incentive schemes. To do so, we utilize optimal contracts in a principal-agent setting, using a...

We analyze optimal labor contracts when the worker is inequity averse towards the employer. Welfare is maximized for an equal sharing rule of surplus between the worker and the firm. That is, profit sharing is optimal even if effort is contractible. If the firm can make a take-it-or leave-it...

Incentives often distort behavior: they induce agents to exert effort but this effort is not employed optimally. This paper proposes a theory of incentive design allowing for such distorted behavior. At the heart of the theory is a trade-off between getting the agent to exert effort and ensuring...