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Compensation, perks, and welfare

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  • Weinschenk, Philipp

Abstract

In an agency model with moral hazard and limited liability, we show that the provision of perks can be inefficient, even if perks are contractible. Interestingly, there can be over- as well as underinvestment in perks. We also demonstrate that perks may actually harm the agent, although perks per se are enjoyable for the agent.

Suggested Citation

  • Weinschenk, Philipp, 2013. "Compensation, perks, and welfare," Economics Letters, Elsevier, vol. 120(1), pages 67-70.
    • Handle: RePEc:eee:ecolet:v:120:y:2013:i:1:p:67-70
    DOI: 10.1016/j.econlet.2013.03.048
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    References listed on IDEAS

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    1. Oliver Hart, 2001. "Financial Contracting," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1079-1100, December.
    2. 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.
    3. Rajan, Raghuram G. & Wulf, Julie, 2006. "Are perks purely managerial excess?," Journal of Financial Economics, Elsevier, vol. 79(1), pages 1-33, January.
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    5. Anthony M. Marino & Ján Zábojník, 2008. "Work‐related perks, agency problems, and optimal incentive contracts," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 565-585, June.
    6. Anthony M. Marino & Ján Zábojník, 2008. "A Rent Extraction View of Employee Discounts and Benefits," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 485-518, July.
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    Cited by:

    1. Weinschenk, Philipp, 2017. "Working conditions and regulation," Labour Economics, Elsevier, vol. 44(C), pages 177-191.
    2. Wang, Ning & Zhang, Chunyan, 2024. "The greed factor of executives and the risk of a company stock price crash," Finance Research Letters, Elsevier, vol. 62(PA).
    3. Liu, Huan & Hou, Canran, 2023. "The external effect of institutional cross-ownership on excessive managerial perks," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 483-501.
    4. Anthony Marino, 2015. "Work environment and moral hazard," Journal of Regulatory Economics, Springer, vol. 48(1), pages 53-73, August.
    5. Maurizio Caserta & Livio Ferrante & Francesco Reito, 2020. "Who pays for workplace benefits?," Manchester School, University of Manchester, vol. 88(4), pages 556-574, July.

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    More about this item

    Keywords

    Compensation; Perks; Agency model; Moral hazard;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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