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Incentives in Business and Academia

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Author Info

  • Holmlund, Bertil

    ()
    (Department of Economics)

Abstract

This paper discusses some issues of compensation policy in business and academia from the perspectives of incentive theory, other theories, and empirical research. The main conclusion is that mechanical rules for performance-related pay are likely to be inferior to more subjective performance evaluation criteria. Formalized performance pay, where pay is directly linked to measures of output, can easily have dysfunctional effects, especially when some dimensions of performance are easier to observe than others. Subjective performance evaluation is not perfect, but it is probably the best method to obtain a holistic assessment of multidimensional performance indicators.

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File URL: http://uu.diva-portal.org/smash/get/diva2:223137/FULLTEXT01.pdf
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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2009:9.

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Length: 17 pages
Date of creation: 09 Jun 2009
Date of revision:
Handle: RePEc:hhs:uunewp:2009_009

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Email:
Web page: http://www.nek.uu.se/
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Related research

Keywords: compensation policy; performance-based pay; incentive theory.;

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