The tenuous relationship between effort and performance pay
Working paper
Permanent lenke
http://hdl.handle.net/11250/164199Utgivelsesdato
2012-06Metadata
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Sammendrag
When a worker is offered performance related pay, the incentive
effect is not only determined by the shape of the incentive contract,
but also by the probability of contract enforcement. We show that
weaker enforcement may reduce the worker s effort, but lead to higher-
powered incentive contracts. This creates a seemingly negative rela-
tionship between effort and performance pay.