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A bonus given: noise, effort and efficiency in a flat hierarchy

Author

Listed:
  • John G Sessions

    (Newcastle University)

  • John D Skatun

    (University of Aberdeen)

Abstract

We show that bonuses are efficient in terms of effort exertion and greater in noisier environments. This could explain the prevalence of bonuses in the financial sector, which is characterised by flat hierarchies and inherently noisy environments. Policies to restrict bonuses should be implemented cautiously since they may imply undesirable efficiency effects.

Suggested Citation

  • John G Sessions & John D Skatun, 2019. "A bonus given: noise, effort and efficiency in a flat hierarchy," Economics Bulletin, AccessEcon, vol. 39(4), pages 2527-2532.
  • Handle: RePEc:ebl:ecbull:eb-19-00593
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    References listed on IDEAS

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    Cited by:

    1. John G. Sessions & John D. Skåtun, 2022. "Luck in a Flat Hierarchy: Wages, Bonuses and Noise," The Economic Record, The Economic Society of Australia, vol. 98(323), pages 373-391, December.

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    More about this item

    Keywords

    Bonuses. Banks;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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