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Reciprocity and Incentive Pay in the Workplace

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  • Robert Dur
  • Arjan Non
  • Hein Roelfsema

Abstract

We study optimal incentive contracts for workers who are reciprocal to management attention. When neither worker's effort nor manager's attention can be contracted, a double moral-hazard problem arises, implying that reciprocal workers should be given weak financial incentives. In a multiple-agent setting, this problem can be resolved using promotion incentives. We test these predictions using German Socio-Economic Panel data. We find that workers who are more reciprocal are significantly more likely to receive promotion incentives, while there is no such relation for individual bonus pay.

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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 177.

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Length: 36 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp177

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Keywords: Reciprocity; social exchange; incentive contracts; double moral hazard; GSOEP;

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