Reciprocity and Incentive Pay in the Workplace

27 Pages Posted: 8 Mar 2010

See all articles by Robert Dur

Robert Dur

Erasmus University Rotterdam (EUR) - Department of Economics; Tinbergen Institute; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Arjan Non

Maastricht University

Hein J. Roelfsema

Utrecht University - Utrecht University School of Economics

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Abstract

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 empirically examine these predictions using data from the German Socio-Economic Panel. We find that workers who are more reciprocal are significantly more likely toreceive promotion incentives, while there is no such relation for individual bonus pay.

Keywords: reciprocity, social exchange, incentive contracts, double moral hazard, GSOEP

JEL Classification: D86, J41, M51, M52, M54, M55

Suggested Citation

Dur, Robert and Non, Arjan and Roelfsema, Hein J., Reciprocity and Incentive Pay in the Workplace. IZA Discussion Paper No. 4782. Available at SSRN: https://ssrn.com/abstract=1566331

Robert Dur (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Economics ( email )

FEW / H 8-15
P.O. Box 1738
Rotterdam, 3000 DR
Netherlands
+31-10-4082159 (Phone)
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HOME PAGE: http://people.few.eur.nl/dur

Tinbergen Institute

Amsterdam/Rotterdam
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Arjan Non

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Hein J. Roelfsema

Utrecht University - Utrecht University School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

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