The extensive research on teacher quality has led to two conclusions. First, there are large and significant differences among teachers in terms of their capacity to improve student achievement. Second, these differences are not captured by common measures of teacher qualifications (E.A. Hanushek, Teacher quality, in: L.T. Izumi, W.M. Evers (Eds.), Teacher Quality, Hoover Press, Palo Alto, CA, ...

This paper studies contract selection between efficiency wages and subjective performance pay to motivate workers in a market setting. The optimal wage contract (which may be a combination of efficiency wages and subjective performance pay) is determined by turnover costs in labor markets. Specifically, labor markets with higher turnover costs use more subjective performance pay and less effici...

The Provision of Wage Insurance by the Firm: Evidence from a Longitudinal Matched Employer-Employee Dataset We evaluate the impact of product market uncertainty on workers wages, addressing the questions: To what extent do firms provide insurance to their workforce, insulating their wages from shocks in product markets? How does the amount of insurance provided vary with firm and worker attribu...

Bonus Culture: Competitive Pay, Screening, and Multitasking This paper analyzes the impact of labor market competition and skill-biased technical change on the structure of compensation. The model combines multitasking and screening, embedded into a Hotelling-like framework. Competition for the most talented workers leads to an escalating reliance on performance pay and other high-powered incen...

In this paper we utilize optimal contracts in a Lazear-Rosen tournament to experimentally examine how the selection of an incentive mechanism by managers and, likewise, the self-selection into a mechanism by employees, a§ect employee output. Depending on the treatment, those assigned the role of a principal or an agent could choose between two theoretically equivalent tournaments: a reward tour...

I propose a simple model with complete and perfect information that analyzes the relation between managerial incentive compensation and the firm’s choice between public and bank debt. My analysis of firm-level data over the period 1992-2005 offers considerable support to the predictions of the model. I find a positive relation between the level of incentive compensation and the preference for b...

This paper is the first to systematically document the relationship between individual teacher performance incentives and student achievement using the United States data. We combine data from the National Education Longitudinal Survey on schools, students, and their families with our own survey conducted in 2000 regarding the use of teacher incentives. This survey on teacher incentives has uni...

In this paper, a principal’s decision between delegating two tasks or handling one of the two tasks herself is analyzed. We assume that the principal uses both, formal contracts and informal agreements sustained by the value of future relationships (relational contracts) as incentive device. It is found that the principal is less likely to delegate both tasks in a dynamic setting than in a stat...

We develop a theoretical model of individual labour supply in which the canonical model of the competitive labour market emerges as a special case. More generally, we are able to characterise labour supply behaviour when, in the absence of a continuum of jobs, firms are able to push workers on to lower indifference curves and off their labour supply curve. We show that in such circumstances wag...

Promotions and Incentives: The Case of Multi-Stage Elimination Tournaments Promotion tournaments play an important role for the provision of incentives in firms. In this paper, we extend research on single-stage rank-order tournaments and analyze behavior in multi-stage elimination tournaments. The main treatment of our laboratory experiment is a two-stage tournament in which equilibrium effort...