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Bénabou, Roland
and Tirole, Jean
(2016)
Bonus Culture: Competitive Pay, Screening and Multitasking.
Journal of Political Economy, vol. 124 (n° 2).
pp. 305-370.
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Abstract
To analyze the impact of labor market competition on the structure of compensation, we embed multitasking and screening within a Hotelling framework. Competition for talent leads to an escalation of performance pay, shifting effort away from long-term investments, risk management, and cooperation. Efficiency losses can exceed those from a single principal, who dulls incentives to extract rents. As competition intensifies, monopsonistic underincentivization of low-skill agents first decreases and then gives way to growing overincentivization of high-skill ones. Aggregate welfare is thus hill-shaped, while inequality tends to rise monotonically. Bonus caps can help restore balance in incentives but may generate other distortions.
| Item Type: | Article |
|---|---|
| Language: | English |
| Date: | April 2016 |
| Refereed: | Yes |
| Uncontrolled Keywords: | incentives, performance pay, bonuses, executive compensation, inequality, multitask |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 16 Mar 2015 14:55 |
| Last Modified: | 29 Mar 2024 15:22 |
| OAI Identifier: | oai:tse-fr.eu:28968 |
| URI: | https://publications.ut-capitole.fr/id/eprint/16683 |
Available Versions of this Item
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Bonus Culture: Competitive Pay, Screening and Multitasking. (deposited 09 Jul 2014 17:32)
- Bonus Culture: Competitive Pay, Screening and Multitasking. (deposited 16 Mar 2015 14:55) [Currently Displayed]
