Performance Pay and Adverse Selection

Espen R. Moen and Asa Rosen

No 4511, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: It is well known in personnel economics that firms may improve the quality of their workforce by offering performance pay. We analyse an equilibrium model where worker productivity is private information and show that the gains to the firms from worker self-selection may not be matched by a corresponding social gain. In particular, the equilibrium incentive to workers to exert too much effort.

Keywords: efficiency; performance pay; selection (search for similar items in EconPapers)
JEL-codes: D82 J30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: 2004-08

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Related works:
Working Paper: Performance pay and adverse selection (2001)
Journal Article: Performance Pay and Adverse Selection (2005)
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