Deferred compensation vs. efficiency wages: An experimental test of effort provision and self-selection

David Macpherson, Kislaya Prasad and Tim Salmon

Journal of Economic Behavior & Organization, 2014, vol. 102, issue C, 90-107

Abstract: We compare the ability of two common compensation structures, efficiency wages (EW) and deferred compensation (DC), at inducing effort from workers. We test predictions on effort provision and elicit preferences between the two wage structures. The theoretical predictions on effort are generally well supported, although we find over-provision of effort with EW. In consequence, although the theoretical prediction that DC is more cost-effective is supported, the difference is small. We also find a marked preference for EW that cannot be explained by risk aversion. The two effects combine to largely dissipate any advantage that DC may have in inducing effort.

Keywords: Incentive contracts; Principal-agent model; Self-selection; Experiments (search for similar items in EconPapers)
JEL-codes: C90 D86 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268114000766
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:102:y:2014:i:c:p:90-107

DOI: 10.1016/j.jebo.2014.03.006

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().