 Drive and TalentBotond Koszegi and Wei Li Journal of the European Economic Association, 2008, vol. 6, issue 1, 210-236 Abstract: We analyze ways in which heterogeneity in responsiveness to incentives ("drive") affects employees' incentives and firms' incentive systems in a career concerns model. On the one hand, because more driven agents work harder in response to existing incentives than less driven ones-and therefore pay is increasing in perceived drive-there is a motive to increase effort to signal high drive. These "drive-signaling incentives" are strongest with intermediate levels of existing incentives. On the other hand, because past output of a more driven agent will seem to the principal to reflect lower ability, there is an incentive to decrease effort to signal low drive. The former effect dominates early in the career, and the latter effect dominates towards the end. To maximize incentives, the principal wants to observe a noisy measure of the agent's effort-such as the number of hours he works-early but not late in his career. (JEL: C70, D82, D23) (c) 2008 by the European Economic Association. JEL-codes: C70 D23 D82 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:tpr:jeurec:v:6:y:2008:i:1:p:210-236 Access Statistics for this article Journal of the European Economic Association is currently edited by Xavier Vives, George-Marios Angeletos, Orazio P. Attanasio, Fabio Canova and Roberto Perotti More articles in Journal of the European Economic Association from MIT Press |
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