It's Not What You Pay it's the Way that You Pay it and that's What Gets Results: Jockeys' Pay and Performance
Management scholars and economists have recently set out the requirements of a system to elicit good performance when it is necessary to align the interests of the principal and agent. We analyse pay and performance in an occupation - jockeys - replete with moral hazard possibilities. We are able to do this because, most unusually, a measure of pure individual performance exists for an unbalanced panel of some 50 individuals for 8 years. Three hypotheses are tested. First, in line with classic agency theory, we expect monitoring mechanisms and incentive contracts to be used to align the interests of principals and agents. Second, pay and performance should be positively associated, subject to the first hypothesis being confirmed. Third, a limited number of jockeys were paid via an alternative mechanism involving very large non-contingent retainer fees. This serves as our counterfactual payment system. In line with agency theory we expect worse performance under such a system than under an incentive contract. The three hypotheses are confirmed: incentive contracts generate superior performance to non-contingent payment systems. Our evidence suggests that 'it's not what you pay it's the way that you pay it … and that's what gets results'. It is maddening that society confers its blessings on traditional academic pursuits but views the study of horseracing as utter frivolity (Beyer, 1983). Copyright Fondazione Giacomo Brodolini and Blackwell Publishers Ltd 1999.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 13 (1999)
Issue (Month): 2 (06)
|Contact details of provider:|| Postal: |
Phone: 0039 06 2040234
Fax: 0039 06 2020687
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1121-7081
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=1121-7081|
When requesting a correction, please mention this item's handle: RePEc:bla:labour:v:13:y:1999:i:2:p:385-411. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.