Economic theory predicts that agents will work harder if they believe in the mission of the organization. Well-identified estimates of exactly how much harder they will work have been elusive, however, because agents select into jobs. We conduct a real effort experiment with participants who...

We analyze the consequences of bonus taxes, limited deductibility of bonuses from company pro ts and a corporate income tax (CIT) in a principal-agent model and explore how these tax instruments a ffect managerial incentives and how they change the design of incentive contracts used in...

To examine the impact of globalization on managerial compensation, we consider a matching model where firms compete both in the product market and in the managerial market. We show that globalization, that is, the simultaneous integration of product markets and managerial pools, leads to an...

This paper investigates the effects of different prize structures on the effort choices of participants in two-stage elimination contests. A format with a single prize is shown to maximize total effort over both stages, but induces low effort in stage 1 and high effort in stage 2. By contrast, a...

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 examine the benefits of objective performance measurement in a field experiment conducted in a retail bank. At the outset objective performance measures of pro fits in each branch were only available on the branch level and managers allocated bonuses to their employees based on subjective...

We study an infinitely repeated principal-agent relationship with on-the-job search. On-the-job search is modeled as a dimension of the agent's effort vector that has no effect on output, but raises his future outside option. The agent's incentives to search are increasing in the degree to which...

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...

The aim of this paper is to provide fresh empirical evidence on the mechanisms through which wage inequality affects worker satisfaction.Theoretically, the wages of others may affect workers' utility for two main reasons: Workers may derive well-being from their social status (the comparison...

In this paper, we examine major trends and potential for cooperatives in the context of four prominent socio-economic issues: the lack of jobs, economic and social inequality, educational mobility, and the priority need for innovations. We present recent data on the amount and types of job...