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Incentive-Enhancing Preferences: Personality, Behavior, and Earnings

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  • Herbert Gintis
  • Samuel Bowles
  • Melissa Osborne

Abstract

Suppose there is a principal-agent relationship between employer and employee in which effort is not contractible, but is elicited through employer incentive mechanisms. We term preferences that allow the employer to elicit effort at lower cost incentive enhancing. We analyze how such preferences affect earnings, and then provide evidence that one of the relevant behavioral traits, efficacy, as well as other psychological aspects of individuals, are signifiant influences on earnings. We conclude that measures of cognitive performance are not sufficient indicators of the effectiveness of schools in promoting student labor market success, incentive enhancing preferences are irreducibly heterogeneous, incentive enhancing preferences help explain the persistence of poverty over generations within families and, unlike cognitive skills, incentive-enhancing traits need not be welfare increasing for their bearers.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 91 (2001)
Issue (Month): 2 (May)
Pages: 155-158

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Handle: RePEc:aea:aecrev:v:91:y:2001:i:2:p:155-158

Note: DOI: 10.1257/aer.91.2.155
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  1. Heckman, James J., 2000. "Policies to foster human capital," Research in Economics, Elsevier, vol. 54(1), pages 3-56, March.
  2. Samuel Bowles & Herbert Gintis & Melissa Osborne, 2000. "The Determinants of Earnings: Skills, Preferences, and Schooling," UMASS Amherst Economics Working Papers 2000-07, University of Massachusetts Amherst, Department of Economics.
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  1. Capitalism. princesses and alienation
    by chris dillow in Stumbling and Mumbling on 2011-05-09 14:09:35
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