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Contracts, Individual Revenue and Performance

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  • Peter Chinloy
  • Daniel Winkler

Abstract

In some jobs individual workers have control over revenue, effort and productivity. These jobs include professional firms for law, medicine and consulting. They include personal services in areas from hair styling to taxi driving. The firm offers contracts that allow for a sharing of risks and rewards. These incentives include a split of output between the firm and worker and employee ownership. For U.S. real estate agents, a choice is available between splitting revenue with the firm or retaining 100 % above a fixed prepaid minimum. These are equity and sequential debt contracts. Under the sequential debt contract, effort increases but output per hour declines. Separately, agents increase effort and productivity if offered ownership in the firm, effectively a claim on others’ performance. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Peter Chinloy & Daniel Winkler, 2012. "Contracts, Individual Revenue and Performance," Journal of Labor Research, Springer, vol. 33(4), pages 545-562, December.
    • Handle: RePEc:spr:jlabre:v:33:y:2012:i:4:p:545-562
    DOI: 10.1007/s12122-012-9147-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Debt contracts; Effort; Productivity; D81; J23; M13;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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