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Does managerial compensation affect workers’ effort?

Author

Listed:
  • Nils Hesse

    (Albert-Ludwigs-Universität Freiburg)

  • María Fernanda Rivas

    (Middle East Technical University-Northern Cyprus Campus)

Abstract

We explore in a two-level gift-exchange experiment whether the managerial compensation influences workers’ effort decisions. Firstly, we find that there exists a strong positive relation between own wage and effort levels for the workers, while the managers’ effort reaches a maximum for intermediate wages and decreases for very high wages. Secondly, our data suggests that the managerial compensations are significantly negatively correlated with the workers’ effort choices: the higher the manager’s wage, the lower the effort level chosen by the workers.

Suggested Citation

  • Nils Hesse & María Fernanda Rivas, 2015. "Does managerial compensation affect workers’ effort?," Journal of Applied Economics, Universidad del CEMA, vol. 18, pages 297-324, November.
    • Handle: RePEc:cem:jaecon:v:18:y:2015:n:2:p:297-324
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    File URL: https://ucema.edu.ar/publicaciones/download/volume18/Hesse.pdf
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    File URL: https://ucema.edu.ar/publicaciones/download/volume18/Hesse_appendix.pdf
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    Citations

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    Cited by:

    1. Reza Hesarzadeh, 2020. "Regulatory oversight and managerial ability," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 10(4), pages 559-585, December.
    2. Burn, Ian & Kettler, Kyle, 2019. "The more you know, the better you’re paid? Evidence from pay secrecy bans for managers," Labour Economics, Elsevier, vol. 59(C), pages 92-109.

    More about this item

    Keywords

    managerial compensation; social preferences; laboratory experiment; giftexchange; effort;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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