Working Paper: NBER ID: w1299
Authors: Edward P. Lazear
Abstract: With the growth of the literature on incentive compensation has come the belief by some that incentive pay may be less rigid than pay that is not designed to effect incentives. Some have gone so far as to argue that this may explain differences in unemployment rates across countries. it is shown that there is no direct link between incentives and wage rigidity. Many compensation schemes that provide incentives have the reverse effect: That is, they tend to make wages more rigid than would be the case were incentives not an issue atall. This paper explores the relationship between wage rigidity and the provision of incentives in a variety of circumstances.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| incentive compensation (M52) | wage rigidity (J31) |
| incentive schemes (J33) | wage rigidity (J31) |
| incentive contracts (D86) | wage variance (J31) |
| incentive contracts (D86) | wage flexibility (J31) |
| piece rates (J33) | cross-sectional wage variability (J31) |
| probabilistic incentive contracts (D86) | cross-sectional wage variability (J31) |
| lifecycle incentive devices (O31) | age-earnings profile (J31) |
| tournament-type labor contracts (Z22) | wage variation relative to expected output (J31) |
| tournament-type labor contracts (Z22) | wage variation relative to realized output (J31) |