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Incentives in Merchant Empires: Portuguese and Dutch Compensation Schemes

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  • Claudia Rei

    () (Department of Economics, Vanderbilt University)

Abstract

The Portuguese and Dutch merchant empires had a similar geographic distribution with outposts all around the Indian Ocean, which they controlled and manned. Both empires faced the same problem of monitoring their agents in remote corners of the world. Each, however, arrived at a different solution to the monitoring problem. I use a principal-agent model to link different monitoring options to the different organizational structures of the two empires. I further investigate the implications of the model with archival data on labor compensation for Portuguese and Dutch workers overseas.

Suggested Citation

  • Claudia Rei, 2011. "Incentives in Merchant Empires: Portuguese and Dutch Compensation Schemes," Vanderbilt University Department of Economics Working Papers 1112, Vanderbilt University Department of Economics.
  • Handle: RePEc:van:wpaper:1112
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    References listed on IDEAS

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    1. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    2. Murphy, Kevin J., 2000. "Performance standards in incentive contracts," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 245-278, December.
    3. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    4. Alan B. Krueger, 1991. "Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 75-101.
    5. Joanne Salop & Steven C. Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
    6. Robert Gibbons, 1996. "Incentives and Careers in Organizations," NBER Working Papers 5705, National Bureau of Economic Research, Inc.
    7. Allen, Robert C., 2001. "The Great Divergence in European Wages and Prices from the Middle Ages to the First World War," Explorations in Economic History, Elsevier, vol. 38(4), pages 411-447, October.
    8. Rei, Claudia, 2011. "The organization of Eastern merchant empires," Explorations in Economic History, Elsevier, vol. 48(1), pages 116-135, January.
    9. Hejeebu, Santhi, 2005. "Contract Enforcement in the English East India Company," The Journal of Economic History, Cambridge University Press, vol. 65(02), pages 496-523, June.
    10. Carlos, Ann M, 1992. "Principal-Agent Problems in Early Trading Companies: A Tale of Two Firms," American Economic Review, American Economic Association, vol. 82(2), pages 140-145, May.
    11. Douglass C. North, 1968. "Sources of Productivity Change in Ocean Shipping, 1600-1850," Journal of Political Economy, University of Chicago Press, vol. 76, pages 953-953.
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    Cited by:

    1. Claudia Rei, 2011. "Turning Points in Leadership: Shipping Technology in the Portuguese and Dutch Merchant Empires," Vanderbilt University Department of Economics Working Papers 1123, Vanderbilt University Department of Economics.

    More about this item

    Keywords

    merchant empires; labor compensation; monitoring;

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • N33 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: Pre-1913

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