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An An Empirical Analysis of Risk, Incentives and the Delegation of Worker Authority

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  • Jed DeVaro
  • Fidan Ana Kurtulus

Abstract

Traditionally, researchers have had difficulty testing the relationship between the degree of risk or uncertainty in workers' environments and incentive pay. The authors employ Prendergast?s (2002) theory that incorporates the delegation of worker authority into the principal-agent model to explain the lack of consistent empirical support for a trade-off between risk and incentives. Using data from the 1998 Workplace Employment Relations Survey (WERS) representing a cross-section of British establishments, the authors provide empirical evidence that clarifies this relationship. Specifically, they extend the standard principal-agent model and find evidence that managers cope with workplace risk by bundling incentive pay with the delegation of worker decision rights.

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Bibliographic Info

Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 63 (2010)
Issue (Month): 4 (July)
Pages: 641-661

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Handle: RePEc:ilr:articl:v:63:y:2010:i:4:p:641-661

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Cited by:
  1. Ben-Ner, Avner & Kong, Fanmin & Lluis, St├ęphanie, 2012. "Uncertainty, task environment, and organization design: An empirical investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 281-313.
  2. Avner Ben-Ner & Fanmin Kong & Stephanie Lluis, . "Uncertainty and Organization Design," Working Papers 0107, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
  3. Gibbs, Michael, 2012. "Design and Implementation of Pay for Performance," IZA Discussion Papers 6322, Institute for the Study of Labor (IZA).
  4. Hideshi Itoh, 2006. "The Theories of International Outsourcing and Integration : A Theoretical Overview from the Perspective of Organizational Economics," Microeconomics Working Papers 21891, East Asian Bureau of Economic Research.
  5. DeVaro, Jed, 2011. "Using "opposing responses" and relative performance to distinguish empirically among alternative models of promotions," MPRA Paper 35175, University Library of Munich, Germany.
  6. Fidan Ana Kurtulus & Douglas Kruse & Joseph Blasi, 2011. "Worker Attitudes Towards Employee Ownership, Profit Sharing and Variable Pay," UMASS Amherst Economics Working Papers 2011-15, University of Massachusetts Amherst, Department of Economics.
  7. Ben-Ner, Avner, 2013. "Preferences and organization structure: Toward behavioral economics micro-foundations of organizational analysis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 46(C), pages 87-96.

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