The negative trade-off between risk and incentives: Evidence from the american whaling industry
Explorations in Economic History, 2008, vol. 45, issue 4, 424-444
This paper analyzes the trade-off between risk and incentives in the share contracts of the American whaling industry. Using a newly collected panel of 5378 individuals who sailed on more than 1000 whaling voyages from 1855-68, the response of sailors' compensation to an increase in risk is estimated. The risks used to identify this response resulted from the commerce-raiding naval vessels of the Confederacy during the Civil War. As the Confederate cruisers sailed primarily in the Atlantic, and therefore posed far less of a threat to whaling voyages to other oceans, a quasi-experimental approach focusing on the differences between Atlantic voyages compared to others is implemented. The results are consistent with a negative trade-off between risk and incentives in the industry's contracts. Moreover, evidence is found of selection among less risk-averse sailors and merchants into riskier voyages during the war.
Keywords: Risk; Incentives; Whaling; Compensation; Civil; war; Moral; hazard (search for similar items in EconPapers)
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Working Paper: The Negative Trade-off Between Risk and Incentives: Evidence from the American Whaling Industry (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:exehis:v:45:y:2008:i:4:p:424-444
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