Performance Incentives with Award Constraints
AbstractThis paper studies the provision of incentives in a large government organization that is divided into independent pools of agencies. Each pool distributes performance awards to the agencies it supervises, subject to two constraints: the awards cannot be negative and the sum of the awards cannot exceed a fixed budget. The theory shows that the constraints on the award distribution bind for pools that are heterogeneous enough, resulting in inefficiencies. The empirical analysis presents conflicting evidence in light of the theory. A possible explanation is that the award designers may have additional objectives in addition to effort maximization.
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Bibliographic InfoArticle provided by University of Wisconsin Press in its journal Journal of Human Resources.
Volume (Year): 37 (2002)
Issue (Month): 4 ()
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Web page: http://jhr.uwpress.org/
Other versions of this item:
- Gerald Marschke & Pascal Courty, 2000. "Performance Incentives with Award Constraints," Discussion Papers 00-11, University at Albany, SUNY, Department of Economics.
- Courty, Pascal & Marschke, Gerald, 2001. "Performance Incentives with Award Constraints," CEPR Discussion Papers 2720, C.E.P.R. Discussion Papers.
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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