Reciprocity and Incentive Pay in the Workplace
We study optimal incentive contracts for workers who are reciprocal to management attention. When neither worker's effort nor manager's attention can be contracted, a double moral-hazard problem arises, implying that reciprocal workers should be given weak financial incentives. In a multiple-agent setting, this problem can be resolved using promotion incentives. We test these predictions using German Socio-Economic Panel data. We find that workers who are more reciprocal are significantly more likely to receive promotion incentives, while there is no such relation for individual bonus pay.
|Keywords||GSOEP, double moral hazard, incentive contracts, reciprocity, social exchange|
Dur, A.J., Non, J.A., & Roelfsema, H.J.. (2008). Reciprocity and Incentive Pay in the Workplace (No. TI 08-080/1). Discussion paper / Tinbergen Institute. Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/14035