Rent-Sharing or Incentives? Estimating the Residual Claim of Average Employees
AbstractThe rent-sharing literature and the agency literature both predict a link between pay and performance. The rent-sharing literature relies on short-term market power to explain this link, and the agency literature bases its prediction on the importance of incentives in principal-agent relationships. Annual data from an unbalanced panel of U.S. manufacturing firms indicate that the performance-elasticity of average employee pay is approximately 0.127271 in small firms while it not significantly different from zero in large firms. The relative lack of incentive pay in the group of large firms demonstrates that the link between pay and performance evident in U.S. manufacturing firms is inconsistent with the exclusive truth of the rent-sharing hypothesis.
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Bibliographic InfoPaper provided by EconWPA in its series Labor and Demography with number 9603002.
Date of creation: 25 Mar 1996
Date of revision: 09 Sep 1996
Note: This paper was published in Applied Economics Letters, 1997, 4, 725-728. (December)
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Other versions of this item:
- Bruce Rayton, 1997. "Rent-sharing or incentives? Estimating the residual claim of average employees," Applied Economics Letters, Taylor & Francis Journals, vol. 4(12), pages 725-728.
- 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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