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Reciprocity and incentive pay in the workplace

  • Dur, Robert
  • Non, Arjan
  • Roelfsema, Hein

We study optimal incentive contracts for workers who are reciprocal to management attention. When neither worker's effort nor manager's attention can be contracted, a double moral-hazard problem arises, implying that reciprocal workers should be given weak financial incentives. In a multiple-agent setting, this problem can be resolved using promotion incentives. We empirically examine these predictions using data from the German Socio-Economic Panel. We find that workers who are more reciprocal are significantly more likely to receive promotion incentives, while there is no such relation for individual bonus pay.

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Article provided by Elsevier in its journal Journal of Economic Psychology.

Volume (Year): 31 (2010)
Issue (Month): 4 (August)
Pages: 676-686

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Handle: RePEc:eee:joepsy:v:31:y:2010:i:4:p:676-686
Contact details of provider: Web page: http://www.elsevier.com/locate/joep

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