Wealth Effects, Incentives and Productivity
AbstractComparative static effects of varying the wealth level of a risk averse agent in a moral hazard setting with limited liability constraints are investigated. There are two principal opposing effects of increasing wealth: the incentive effect which allows stronger punishments for poor performance, thereby encouraging higher effort; and the preference effect, which reduces the agent's effort incentives owing to income effects in the demand for leisure. It is shown that optimal effort levels are initially constant, subsequently increasing and eventually decreasing in wealth. Hence agents with intermediate walth levels are the most productive.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Boston University, Institute for Economic Development in its series Boston University - Institute for Economic Development with number 77.
Date of creation: Jan 1997
Date of revision:
Other versions of this item:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Ulf von Lilienfeld-Toal & Dilip Mookherjee, 2005.
"Bankruptcy Law, Bonded Labor And Inequality,"
Boston University - Department of Economics - Working Papers Series
WP2005-035, Boston University - Department of Economics.
- Dilip Mookherjee & Ulf von Lilienfeld-Toal, 2005. "Bankruptcy Law, Bonded Labor and Inequality," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series DP-155, Boston University - Department of Economics.
- Mookherjee, Dilip & von Lilienfeld-Toal, Ulf, 2006. "Bankruptcy law, bonded labor and inequality," Proceedings of the German Development Economics Conference, Berlin 2006 18, Verein für Socialpolitik, Research Committee Development Economics.
- Perroni, Carlo & Proto, Eugenio, 2010. "Entrepreneurial drain under moral hazard: A high-yield sector curse?," Journal of Development Economics, Elsevier, vol. 93(1), pages 63-70, September.
- Christa N. Brunnschweiler & Erwin H. Bulte, 2006.
"The Resource Curse Revisited and Revised: A Tale of Paradoxes and Red Herrings,"
CER-ETH Economics working paper series
06/61, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
- Brunnschweiler, Christa N. & Bulte, Erwin H., 2008. "The resource curse revisited and revised: A tale of paradoxes and red herrings," Journal of Environmental Economics and Management, Elsevier, vol. 55(3), pages 248-264, May.
- Thiele, Henrik & Wambach, Achim, 1999. "Wealth Effects in the Principal Agent Model," Journal of Economic Theory, Elsevier, vol. 89(2), pages 247-260, December.
- Perroni, Carlo & Proto, Eugenio, 2007. "Moral Hazard and Entrepreneurial Failure in a Two-sector Model of Productive Matching - with an Application to the Natural Resource Curse," The Warwick Economics Research Paper Series (TWERPS) 796, University of Warwick, Department of Economics.
- Dilip Mookherjee, 2006.
"Decentralization, Hierarchies, and Incentives: A Mechanism Design Perspective,"
Journal of Economic Literature,
American Economic Association, vol. 44(2), pages 367-390, June.
- Dilip Mookherjee, 2005. "Decentralization, Hierarchies and Incentives: A Mechanism Design Perspective," Boston University - Department of Economics - Working Papers Series WP2005-034, Boston University - Department of Economics, revised Sep 2005.
- Shawn Ni & Pham Hoang Van, 2005.
"High Corruption Income in Ming and Qing China,"
0503, Department of Economics, University of Missouri.
- Guenther G. Schulze & Bambang Suharnoko Sjahrir & Nikita Zakharov, 2013. "Corruption in Russia," Discussion Paper Series 22, Department of International Economic Policy, University of Freiburg, revised Apr 2013.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).
If references are entirely missing, you can add them using this form.