Empirical and experimental papers find that high-powered incentives may reduce performance rather than improve it; a phenomenon referred to as "choking under pressure". We show that competition for high ability workers nevertheless leads firms to offer high bonus payments, thereby deliberately...

We show that long-term compensation is associated with higher pay in the financial industry and the legal sector. Then, using a detailed survey of law school graduates, we explore why firms use long-term compensation. We find that individuals with jobs that make them highly visible and that...

A large literature suggests that incentive pay and delegation of worker authority are positively related. Using data from a large cross section of British establishments, we show that the positive relationship found in the empirical literature masks a stark difference across jobs. Classifying...

We identify a new problem that may arise when heterogeneous workers are motivated by relative performance schemes: If workers’ abilities and the production technology are complements, the firm may prefer not to adopt a more advanced technology even though this technology would costlessly...