rigid than pay that is not designed to effect incentives. Some have gone so far as to argue that this may explain … differences in unemployment rates across countries. it is shown that there is no direct link between incentives and wage rigidity …. Many compensation schemes that provide incentives have the reverse effect: That is, they tend to make wages more rigid than …

wage cyclicality from incentives neither affects the slope of the Phillips curve for prices nor dampens unemployment … model suggests that 46% of the wage cyclicality in the data arises from incentives, with the remainder attributable to … bargaining and outside options. A standard model without incentives calibrated to weakly procyclical wages matches the impulse …