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.

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Keywords GSOEP, double moral hazard, incentive contracts, reciprocity, social exchange
JEL D41, Perfect Competition (jel), D86, Economics of Contract Law (jel), M51, Firm Employment Decisions; Promotions (hiring, firing, turnover, part-time, temporary workers, seniority issues) (jel), M52, Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs, seniority issues) (jel), M54, Labor Management (team formation, worker empowerment, job design, tasks and authority, job satisfaction) (jel), M55, Labor Contracting Devices: Outsourcing; Franchising; Other (jel)
Publisher Tinbergen Institute
Persistent URL hdl.handle.net/1765/14035
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