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Incentives for Helping on the Job: Theory and Evidence

Author

Listed:
  • Robert Drago

    (University of Wisconsin-Milwaukee)

  • Gerald T. Garvey

    (Australian National University)

Abstract

Recent advances in incentive theory stress the multi- dimensional nature of agent effort and particularly the case where workers can improve the performance of others through `helping' efforts. This paper provides a simple model of an agent's incentive to help depending on the compensation package, the cost of monitoring, and the allocation of tasks. We then analyze the determinants of reported helping efforts within workgroups for a sample of Australian workers. As expected, workers are less likely to help one another when promotion incentives are strong. Subsidiary results are consistent with our `contest' interpretation of this finding and not consistent with `gift exchange' or other variants of the efficiency wage hypothesis. Also as predicted, a wide range of job tasks amplifies the negative effect of promotional incentives, while monitoring of help mitigates the negative effect. We find an unexpected positive effect of piece rates on helping effort for long-term employees which we show is consistent with repeated game effects between workers. These considerations do not overturn our findings about the effects of tournaments.(JEL J33)

Suggested Citation

  • Robert Drago & Gerald T. Garvey, 1994. "Incentives for Helping on the Job: Theory and Evidence," Labor and Demography 9402002, University Library of Munich, Germany, revised 29 Mar 1994.
  • Handle: RePEc:wpa:wuwpla:9402002
    Note: 32 pages text, 4 pages tables, WordPerfect 5.1 file. VVdecode then Unzip to read. Paper substantially revised, mainly to deal with possibility of efficiency wage effects and to incorporate simulations.
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    References listed on IDEAS

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    2. Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988. " Compensation and Incentives: Practice vs. Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 593-616, July.
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    4. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1993. "Hierarchies and compensation: A case study," European Economic Review, Elsevier, vol. 37(2-3), pages 366-378, April.
    5. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-636, May.
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    9. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
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    12. Ronald G. Ehrenberg & Michael L. Bognanno, 1990. "The Incentive Effects of Tournaments Revisited: Evidence from the European PGA Tour," ILR Review, Cornell University, ILR School, vol. 43(3), pages 74, April.
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    Cited by:

    1. Canice Prendergast, 1996. "What Happens Within Firms? A Survey of Empirical Evidence on Compensation Policies," NBER Working Papers 5802, National Bureau of Economic Research, Inc.

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    JEL classification:

    • J - Labor and Demographic Economics

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