A growing number of econometric examinations show that works councils substantially shape the personnel policy of firms in Germany. Firms with works councils make greater use of various HRM practices. This gives rise to the question of whether employers view the shaping of personnel policy...

Market imperfections may cause firms and workers to under-invest in specific training. This paper shows that profit sharing may be a suitable instrument to enhance specific training investments, either by enhancing wage flexibility or by increasing the returns to training. As a result, profit...

The paper provides empirical evidence how promotion incentives and performance pay are related to nonverifiable human capital acquisition contingent on its grade of firm specificity. Consistent with Prendergast (1993), I document that promotion incentives are positively related to nonverifiable...

In this paper the impact of ability and learning potential on incentive contracts is analyzed. A central feature of the model is that the true ability will not be revealed. The learning potential of an agent is modeled as the magnitude of impact on the agent's expected ability that...

In this paper the impact of ability and learning potential on incentive contracts is analyzed. A central feature of the model is that the true ability will not be revealed. The learning potential of an agent is modeled as the magnitude of impact on the agent's expected ability that...

In this paper the impact of ability and learning potential on incentive contracts is analyzed. The model's pay structure shows if agents must be motivated both to acquire knowledge and to use it appropriately the most successful agent need not be the one who receives the highest pay ex post. A...

Questions about compensation structures and incentive effects of pay-for-performance components are important for firms' Human Resource Management as well as for economics in general and labor economics in particular. This paper provides scarce insider econometric evidence on the structure and...

Baker (2002) has demonstrated theoretically that the quality of performance measures used in compensation contracts hinges on two characteristics: noise and distortion. These criteria, though, will only be useful in practice as long as the noise and distortion of a performance measure can be...

Conventional wisdom suggests that an increase in monetary incentives should induce agents to exert higher effort. In this paper, however, we demonstrate that this may not hold in team settings. In the context of sequential team production with positive externalities between agents, incentive...

Criticism of the compensation practice of bonus payments was a key element of the public debate concerning the causes and consequences of the global financial crisis (GFC). Along with the criticism of bonuses in the financial and banking sector, the validity of the performance principle as a...