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Career Concerns, Monetary Incentives and Job Design

Author

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  • Oddvar M. Kaarbøe
  • Trond E. Olsen

Abstract

We study optimal incentive contracts when commitments are limited, and agents have multiple tasks and career concerns. The agent's career concerns are determined by the outside market. We show that the principal might want to give the strongest explicit incentives to agents far from retirement to account for the fact that career concerns might induce behavior in conflict with the principal's preferences. Furthermore, we show that maximized welfare might be decreasing in the strength of career concerns, that optimal incentives can be positively correlated with various measures of uncertainty, and that career incentives have strong implications for optimal job design.

Suggested Citation

  • Oddvar M. Kaarbøe & Trond E. Olsen, 2006. "Career Concerns, Monetary Incentives and Job Design," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(2), pages 299-316, July.
    • Handle: RePEc:bla:scandj:v:108:y:2006:i:2:p:299-316
    DOI: 10.1111/j.1467-9442.2006.00453.x
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    Cited by:

    1. Anil Arya & Brian Mittendorf, 2011. "The Benefits of Aggregate Performance Metrics in the Presence of Career Concerns," Management Science, INFORMS, vol. 57(8), pages 1424-1437, August.
    2. Tobias Brünner & Guido Friebel & Richard Holden & Suraj Prasad, 2022. "Incentives to Discover Talent," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 38(2), pages 309-344.
    3. Enno Siemsen, 2008. "The Hidden Perils of Career Concerns in R& D Organizations," Management Science, INFORMS, vol. 54(5), pages 863-877, May.
    4. Arya, Anil & Mittendorf, Brian, 2015. "Career concerns and accounting performance measures in nonprofit organizations," Accounting, Organizations and Society, Elsevier, vol. 40(C), pages 1-12.
    5. Baik, Bok & Evans, John H. & Kim, Kyonghee & Yanadori, Yoshio, 2016. "White collar incentives," Accounting, Organizations and Society, Elsevier, vol. 53(C), pages 34-49.
    6. Englmaier, Florian & Filipi, Ales & Singh, Ravi, 2010. "Incentives, reputation and the allocation of authority," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 413-427, November.
    7. Görlich, Dennis, 2010. "Complementary tasks and the limits to the division of labour," Kiel Working Papers 1670, Kiel Institute for the World Economy (IfW Kiel).
    8. Anil Arya & Brian Mittendorf, 2007. "The Benefits of Aggregate Performance Metrics in the Presence of Career Concerns," Yale School of Management Working Papers amz2549, Yale School of Management, revised 01 Jan 2009.
    9. Peter O. Christensen & Hans Frimor & Florin Şabac, 2020. "Real Incentive Effects of Soft Information," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 514-541, March.
    10. Biljana Bogićević Milikić & Milica Čučković, 2019. "How To Increase Job Satisfaction And Organisational Commitment In The Ict Sector Through Job Design," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 64(222), pages 81-116, July – Se.

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