Profit Sharing and Workplace Productivity: Does Teamwork Play a Role? The conditions under which profit sharing affects workplace productivity have never been fully understood. Using panel data, this paper examines whether there is any link between adoption of an employee profit sharing plan and subsequent productivity growth in Canadian establishments, and whether this relationship is affected...

Optimal Incentive Contracts under Inequity Aversion We analyze the Moral Hazard problem, assuming that agents are inequity averse. Our results differ from conventional contract theory and are more in line with empirical findings than standard results. We find: First, inequity aversion alters the structure of optimal contracts. Second, there is a strong tendency towards linear sharing rules. Thi...

Economic theory suggests that agents care for the outcomes they produce. This paper studies the conditions under which a pro-social mission of a job affects workers’ motivation to perform well. In particular, we investigate whether it makes a difference if workers actively decide upon doing a mission-oriented job or are exogenously assigned. We find that a pro-social mission itself affects only...

Effort-biased technological change and other explanations for work intensification are investigated. It is hypothesised that technological and organizational changes are one important source of work intensification and supportive evidence is found using establishment data for Britain in the 1990s. Work intensification has also been stimulated by the use of highcommitment human resource policies...

In 2000 the government introduced a nationwide reform of teacher pay in England, which linked increases in salary to the performance of individual teachers. This paper outlines a research project which evaluates the impact of the new pay regime on pupil attainment. The paper provides a brief summary of the nature of the new pay regime and relevant aspects of the reforms, an outline of the metho...

What is the best way of providing incentives to a team of agents? Agency theory has given a number of answers in the past three decades on the choice between collective and relative incentive provision. We present a broad overview of this rich literature through a simple model. While the early contributions emphasize the role of performance comparison and competition in motivating agents, more ...

Profit Sharing and Relative Consumption Traditionally, it has been argued that profit sharing can increase employment and welfare because it lowers marginal labour costs without reducing total cost or labour income. In this paper, we show that profit sharing can also represent a Pareto-improvement if labour supply is excessive due to relative consumption effects. Mandatory profit sharing reduce...

Consider Holmström’s moral hazard in teams problem when there are n agents, each agent i has an ai-dimensional strategy space and output is m-dimensional. We show that a compensation mechanism that satis…es budget balance, limited liability and implements an e¢ cient allocation generically exists if and only if Pn i=1 ai=(n 1) < m. Moreover, under a weak additional condition, the equilibrium im...

Using a comprehensive and survivor bias-free dataset of US hedge funds, we document the role that inside investment plays in managerial compensation and fund performance. We find that funds with greater investment by insiders outperform funds with less “skin in the game” on a factor-adjusted basis, exhibit greater return persistence, and feature lower fund flow-performance sensitivities. These ...