DOES MANAGERIAL COMPENSATION AFFECT WORKERS' EFFORT?

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Hesse N., Rivas M. F.

JOURNAL OF APPLIED ECONOMICS, vol.18, no.2, pp.297-323, 2015 (Journal Indexed in SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 18 Issue: 2
  • Publication Date: 2015
  • Doi Number: 10.1016/s1514-0326(15)30013-1
  • Title of Journal : JOURNAL OF APPLIED ECONOMICS
  • Page Numbers: pp.297-323

Abstract

We explore in a two-level gift-exchange experiment whether the managerial compensation influences workers' effort decisions. Firstly, we find that there exists a strong positive relation between own wage and effort levels for the workers, while the managers' effort reaches a maximum for intermediate wages and decreases for very high wages. Secondly, our data suggests that the managerial compensations are significantly negatively correlated with the workers' effort choices: the higher the manager's wage, the lower the effort level chosen by the workers.