Optimal Incentive Contracts In The Presence Of Career Concerns: Theory And Evidence
This paper studies optimal incentive contracts when workers have career concerns--concerns about the effects of current performance on future compensation. The authors show that the optimal compensation contract optimizes total incentives: the combination of the implicit incentives from career concerns and the explicit incentives from the compensation contract. Thus, the explicit incentives from the optimal compensation contract should be strongest for workers close to retirement because career concerns are weakest for these workers. The authors find empirical support for this prediction in the relation between chief-executive compensation and stock-market performance. Copyright 1992 by University of Chicago Press.
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|Date of creation:||1990|
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- Aron, Debra J, 1987. "Worker Reputation and Productivity Incentives," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 87-106, October.
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"Reputation and Hierarchy in Dynamic Models of Employment,"
Journal of Political Economy,
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- David P. Baron & David Besanko, 1987. "Commitment and Fairness in a Dynamic Regulatory Relationship," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 413-436.
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- Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-431, July.
- Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-715, September.
- Sherwin Rosen, 1985. "Prizes and Incentives in Elimination Tournaments," NBER Working Papers 1668, National Bureau of Economic Research, Inc.
- Laffont, Jean-Jacques & Tirole, Jean, 1988. "The Dynamics of Incentive Contracts," Econometrica, Econometric Society, vol. 56(5), pages 1153-1175, September.
- Jean-Jacques Laffont & Jean Tirole, 1985. "The Dynamics of Incentive Contracts," Working papers 397, Massachusetts Institute of Technology (MIT), Department of Economics.
- Coughlan, Anne T. & Schmidt, Ronald M., 1985. "Executive compensation, management turnover, and firm performance : An empirical investigation," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 43-66, April.
- Smith, Clifford Jr. & Warner, Jerold B., 1979. "On financial contracting : An analysis of bond covenants," Journal of Financial Economics, Elsevier, vol. 7(2), pages 117-161, June. Full references (including those not matched with items on IDEAS)
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