A worker's utility may increase with his income, but envy can make his utility decline with his employer's income. This … article uses a principal-agent model to study profit-maximizing contracts when a worker envies his employer. Envy tightens the … applications of our theoretical work: envy can explain why a lower-level worker is awarded stock options, why incentive pay is …

A worker's utility may increase with his own income, but envy can make his utility decline with his employer's income … various assumptions about the object and generality of envy. Envy amplifies the effect of incentives on effort and, therefore …, increases optimal incentive pay. Moreover, envy can make profit-sharing optimal, even when the worker's effort is fully …

flexibility. I suggest that labor and human resource economics can benefit from including envy into the standard set of factors … considered in their theoretical and empirical models. -- envy ; interdependent preferences ; skill segregation ; wage dynamics …