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.

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