The Tenuous Relationship between Effort and Performance Pay
AbstractWhen a worker is offered performance related pay, the incentive effect is not only determined by the shape of the incentive contract, but also by the probability of contract enforcement. We show that weaker enforcement may reduce the worker's effort, but lead to higher-powered incentive contracts. This creates a seemingly negative relationship between effort and performance pay.
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Bibliographic InfoPaper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2012/8.
Length: 28 pages
Date of creation: 29 Jun 2012
Date of revision:
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Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
More information through EDIRC
Effort; performance pay; incentive contract;
Other versions of this item:
- Kvaløy, Ola & Olsen, Trond, 2012. "The Tenuous Relationship between Effort and Performance Pay," UiS Working Papers in Economics and Finance 2012/11, University of Stavanger.
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
- NEP-BEC-2012-07-23 (Business Economics)
- NEP-CTA-2012-07-23 (Contract Theory & Applications)
- NEP-HRM-2012-07-23 (Human Capital & Human Resource Management)
- NEP-LAB-2012-07-23 (Labour Economics)
- NEP-LMA-2012-07-23 (Labor Markets - Supply, Demand, & Wages)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- On the negative correlation between effort and pay
by Economic Logician in Economic Logic on 2012-06-29 15:49:00
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