Working Paper: NBER ID: w5705
Authors: Robert Gibbons
Abstract: This paper surveys two related pieces of the labor-economics literature: incentive pay and careers in organizations. In the discussion of incentives, I first summarize theory and evidence related to the classic agency model, which emphasizes the tradeoff between insurance and incentives. I then offer econometric and case-study evidence suggesting that this classic model ignores several crucial issues and sketch new models that begin to analyze these issues. In the discussion of careers in organizations, I begin by summarizing evidence on wages and positions using panel data within firms. This evidence is sparse and far-flung (drawn from industrial relations, organizational behavior, and sociology, as well as from labor economics); I identify ten basic questions that merit more systematic investigation. Turning to theory, I describe building-block models that address one or a few pieces of evidence, but focus on more recent models that address broad patterns of evidence.
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 pay (J33) | Worker performance (J33) |
| Crop risk increases (Q54) | Increase in risk-sharing mechanisms (F65) |
| Nonlinear incentive contracts (D86) | Gaming behaviors (C72) |
| Steeper incentive slopes (H32) | Stronger incentives (H39) |
| CEO pay (M12) | Firm performance (L25) |