American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Pay for Performance and Beyond
American Economic Review
vol. 107,
no. 7, July 2017
(pp. 1753–77)
Abstract
Incentives are often associated with narrow financial rewards such as bonuses or executive stock options. But in general such rewards are just a small part of the design of incentives. Properly designed incentive systems have to take into account the full portfolio of activities that the agent can engage in, the array of instruments, many nonfinancial, that are available to influence individuals and consider the factors that motivate them in different settings. Thinking about incentives as a system of interacting instruments and influences has been a major advance in the economics of incentives in recent years. In this lecture I will describe the path from pay for performance to the broader view of incentive systems.Citation
Holmström, Bengt. 2017. "Pay for Performance and Beyond." American Economic Review, 107 (7): 1753–77. DOI: 10.1257/aer.107.7.1753JEL Classification
- D21 Firm Behavior: Theory
- D82 Asymmetric and Private Information; Mechanism Design
- D86 Economics of Contract: Theory
- J33 Compensation Packages; Payment Methods
- J41 Labor Contracts
- M12 Personnel Management; Executives; Executive Compensation
- M52 Personnel Economics: Compensation and Compensation Methods and Their Effects