We investigate two theoretical approaches that focus on bonuses as part of a firm’s long-term wage policy. The first approach argues that explicit bonuses serve as substitutes for implicit career concerns. The second claims that bonuses act as complements to an executive’s internal career....

The theory of compensating wage differentials is generally accepted. It states that firms have to pay wage bonuses for hazardous work. However, there is as yet no strong or even contrary evidence for compensating wage differentials in Germany. By estimating wage regressions with data from the...