IDEAS home Printed from https://ideas.repec.org/a/bla/randje/v39y2008i1p305-326.html
   My bibliography  Save this article

Status and incentives

Author

Listed:
  • Emmanuelle Auriol
  • Régis Renault

Abstract

This article introduces status as reflecting an agent's claim to recognition in her work. This is a scarce resource: increasing an agent's status requires that another agent's status be decreased. Higher‐status agents are more willing to exert effort in exchange for money; better‐paid agents would exert higher effort in exchange for improved status. The results are consistent with actual management practices: (i) egalitarianism is desirable in a static context; (ii) in a long‐term work relationship, juniors' compensation is delayed; and (iii) past performance is rewarded by pay increases along with improved status within the organization's hierarchy.

Suggested Citation

  • Emmanuelle Auriol & Régis Renault, 2008. "Status and incentives," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 305-326, March.
    • Handle: RePEc:bla:randje:v:39:y:2008:i:1:p:305-326
    DOI: 10.1111/j.1756-2171.2008.00015.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1756-2171.2008.00015.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1756-2171.2008.00015.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Emmanuelle Auriol & Régis Renault, 2001. "Incentive Hierarchies," Annals of Economics and Statistics, GENES, issue 63-64, pages 261-282.
    2. Chiappori, Pierre-Andre & Macho, Ines & Rey, Patrick & Salanie, Bernard, 1994. "Repeated moral hazard: The role of memory, commitment, and the access to credit markets," European Economic Review, Elsevier, vol. 38(8), pages 1527-1553, October.
    3. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    4. Fershtman, Chaim & Weiss, Yoram, 1998. "Social rewards, externalities and stable preferences," Journal of Public Economics, Elsevier, vol. 70(1), pages 53-73, October.
    5. Paul Oyer, 2008. "Salary or benefits?," Research in Labor Economics, in: Work, Earnings and Other Aspects of the Employment Relation, pages 429-467, Emerald Group Publishing Limited.
    6. Rajan, Raghuram G. & Wulf, Julie, 2006. "Are perks purely managerial excess?," Journal of Financial Economics, Elsevier, vol. 79(1), pages 1-33, January.
    7. Henry S. Farber, 1997. "The Changing Face of Job Loss in the United States, 1981-1995," Working Papers 761, Princeton University, Department of Economics, Industrial Relations Section..
    8. Hashimoto, Masanori & Raisian, John, 1985. "Employment Tenure and Earnings Profiles in Japan and the United States," American Economic Review, American Economic Association, vol. 75(4), pages 721-735, September.
    9. James M. Malcomson & Frans Spinnewyn, 1988. "The Multiperiod Principal-Agent Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(3), pages 391-407.
    10. Postlewaite, Andrew, 1998. "The social basis of interdependent preferences," European Economic Review, Elsevier, vol. 42(3-5), pages 779-800, May.
    11. Weiss, Yoram & Fershtman, Chaim, 1998. "Social status and economic performance:: A survey," European Economic Review, Elsevier, vol. 42(3-5), pages 801-820, May.
    12. Milgrom, Paul R, 1988. "Employment Contracts, Influence Activities, and Efficient Organization Design," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 42-60, February.
    13. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    14. Rogerson, William P, 1985. "Repeated Moral Hazard," Econometrica, Econometric Society, vol. 53(1), pages 69-76, January.
    15. Bauer, Thomas K. & Bender, Stefan, 2001. "Flexible Work Systems and the Structure of Wages: Evidence from Matched Employer-Employee Data," IZA Discussion Papers 353, Institute of Labor Economics (IZA).
    16. Robert H. Topel & Michael P. Ward, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 439-479.
    17. Chaim Fershtman & Hans K. Hvide & Yoram Weiss, 2006. "Cultural Diversity, Status Concerns and the Organization of Work," Research in Labor Economics, in: The Economics of Immigration and Social Diversity, pages 361-396, Emerald Group Publishing Limited.
    18. Ghemawat, Pankaj, 1995. "Competitive Advantage and Internal Organization: Nucor Revisited," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(4), pages 685-717, Winter.
    19. Sheryl Ball & Catherine Eckel & Philip J. Grossman & William Zame, 2001. "Status in Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(1), pages 161-188.
    20. Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483, Elsevier.
    21. Raghuram G. Rajan & Julie Wulf, 2006. "The Flattening Firm: Evidence from Panel Data on the Changing Nature of Corporate Hierarchies," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 759-773, November.
    22. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    23. Joanne Salop & Steven Salop, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 619-627.
    24. Henry S. Farber, 1997. "The Changing Face of Job Loss in the United States, 1981-1995," Working Papers 761, Princeton University, Department of Economics, Industrial Relations Section..
    25. Gerhart, B. & Milkovick, G.T., 1992. "Employee Compensation: Research and Practice," Papers 92-26, Cornell - Center for Advanced Human Resource Studies.
    26. Edward Lazear & Paul Oyer, 2004. "The Structure of Wages and Internal Mobility," American Economic Review, American Economic Association, vol. 94(2), pages 212-216, May.
    27. Fershtman, C. & Weiss, Y. & Hvide, H.K., 2001. "Status Concerns and the Organization of Work," Papers 2001-2, Tel Aviv.
    28. Henry S. Farber, 1997. "The Changing Face of Job Loss in the United States, 1981-1995," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 55-142.
    29. Becker, Gary S. & Werning, Ivan & Murphy, Kevin M., 2000. "Status, Lotteries, and Inequality," Working Papers 160, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    30. Pradeep Dubey & John Geanakoplos, 2004. "Grading Exams: 100, 99, ..., 1 or A, B, C? Incentives in Games of Status," Cowles Foundation Discussion Papers 1467, Cowles Foundation for Research in Economics, Yale University.
    31. Robert Gibbons & Michael Waldman, 1999. "A Theory of Wage and Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1321-1358.
    32. Bauer, Thomas & Bender, Stefan, 2001. "Flexible Wages Systems and the Structure of Wages: Evidence from Matched Employer-Employee Data," CEPR Discussion Papers 2980, C.E.P.R. Discussion Papers.
    33. John J. Abowd & John Haltiwanger & Julia Lane, 2004. "Integrated Longitudinal Employer-Employee Data for the United States," American Economic Review, American Economic Association, vol. 94(2), pages 224-229, May.
    34. Erica L. Groshen & David K. Levine, 1998. "The rise and decline(?) of U.S. internal labor markets," Research Paper 9819, Federal Reserve Bank of New York.
    35. Ball, Sheryl & Eckel, Catherine C., 1998. "The economic value of status," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 27(4), pages 495-514.
    36. Robert H. Frank, 1984. "Interdependent Preferences and the Competitive Wage Structure," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 510-520, Winter.
    37. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805, Elsevier.
    38. Joanne Salop & Steven C. Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
    39. Edward P. Lazear, 1991. "Labor Economics and the Psychology of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 89-110, Spring.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Auriol, Emmanuelle & Renault, Régis, 2000. "The Costs and Benefits of Symbolic Differentiation in the Work Place," IDEI Working Papers 101, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2002.
    2. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    3. Michael Waldman, 2012. "Theory and Evidence in Internal LaborMarkets [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    4. Macera, Rosario, 2018. "Intertemporal incentives under loss aversion," Journal of Economic Theory, Elsevier, vol. 178(C), pages 551-594.
    5. Jeremy T. Fox, 2010. "Estimating the Employer Switching Costs and Wage Responses of Forward-Looking Engineers," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 357-412, April.
    6. Edward P. Lazear, 1995. "Personnel Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121883, December.
    7. Bergemann, Annette & Mertens, Antje, 2004. "Job Stability Trends, Layoffs, and Transitions to Unemployment: An Empirical Analysis for West Germany," IZA Discussion Papers 1368, Institute of Labor Economics (IZA).
    8. Dohmen, Thomas J., 2004. "Performance, seniority, and wages: formal salary systems and individual earnings profiles," Labour Economics, Elsevier, vol. 11(6), pages 741-763, December.
    9. Bergemann, Annette & Mertens, Antje, 2000. "Job stability trends, layoffs and quits: An empirical analysis for West Germany," SFB 373 Discussion Papers 2001,102, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    10. Edward P. Lazear & Paul Oyer, 2012. "Personnel Economics [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    11. Ederer, Florian & Patacconi, Andrea, 2010. "Interpersonal comparison, status and ambition in organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 348-363, August.
    12. Jin, Xin, 2014. "The Signaling Role of Note Being Promoted: Theory and Evidence," MPRA Paper 58484, University Library of Munich, Germany.
    13. Ramalingam, Abhijit, 2009. ""Endogenous" Relative Concerns: The Impact of Workers' Characteristics on Status and Pro ts in the Firm," MPRA Paper 18759, University Library of Munich, Germany.
    14. C. Sofia Machado & Miguel Portela, 2011. "Age and opportunities for promotion," NIPE Working Papers 03/2011, NIPE - Universidade do Minho.
    15. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 91-114, Fall.
    16. Oindrila Dey & Swapnendu Banerjee, 2022. "Incentives, Status and Thereafter: A Critical Survey," South Asian Journal of Macroeconomics and Public Finance, , vol. 11(1), pages 95-115, June.
    17. Edward P. Lazear, 1999. "Personnel Economics: Past Lessons and Future Directions," NBER Working Papers 6957, National Bureau of Economic Research, Inc.
    18. Jin, Xin, 2014. "Flattening Firms and Wage Distribution," MPRA Paper 58485, University Library of Munich, Germany.
    19. Xin Jin, 2014. "The Signaling Role of Not Being Promoted: Theory and Evidence," Working Papers 0314, University of South Florida, Department of Economics.
    20. Lazear, Edward P, 1999. "Personnel Economics: Past Lessons and Future Directions: Presidential Address to the Society of Labor Economists, San Francisco, May 1, 1998," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 199-236, April.
    21. repec:eee:labchp:v:3:y:1999:i:pb:p:2439-2483 is not listed on IDEAS
    22. Huizinga, H.P., 1996. "Intrafirm Information Transfer and Wages," Other publications TiSEM e39998b3-304d-485b-b186-3, Tilburg University, School of Economics and Management.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:randje:v:39:y:2008:i:1:p:305-326. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/randdus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.