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Reciprocity and Incentive Pay in the Workplace

  • Dur, Robert

    ()

    (Erasmus University Rotterdam)

  • Non, Arjan

    ()

    (ROA, Maastricht University)

  • Roelfsema, Hein

    ()

    (Utrecht School of Economics)

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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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4782.

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Length: 27 pages
Date of creation: Feb 2010
Date of revision:
Publication status: published in: Journal of Economic Psychology, 2010, 31(4), 676-686
Handle: RePEc:iza:izadps:dp4782
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