An underlying assumption in the executive compensation literature is that there is a national labor market for CEOs. The urban economics literature, however, documents higher ability among workers in large metropolitans, which results in a real and stable urban wage premium. In this paper, we investigate the link between the spatial clustering of firms in big, central cities (i.e., urban agglom...

We develop a dynamic agency model in which the agent controls current earnings via short-term effort and firm growth via long-term effort and the firm is subject to both shortand long-run shocks. Under the optimal contract, agency conflicts can induce both overand underinvestment in shortand long-term efforts compared to first best, leading to shortor long-termism in corporate policies. Exposur...

This article describes how theoretical developments in the fields of agency and contract economics may be of great inspiration for the practical design of incentive– and performance–based compensation systems. Principles and stylized facts arising from the analysis of the principal–agent framework and the economic theory of teams are presented by means of trade-offs that human resource practiti...

This paper empirically tests the principal-agent model prediction that the use of performance measures for incentive purposes is affected by the agent’s risk aversion. We find that the use of both accounting and market performance measures in executive compensation contracts decreases as the level of risk aversions increases. We further find that agent-specific characteristics, i.e., risk avers...

Public damage abatement and compensation programs may be used to alter private incentives for damage abatement and habitat provision. A model is developed that explains the economic logic behind prevalent characteristics of public wildlife damage programs. The model is supported with an examination of a broad cross-section of wildlife agency policy and law. The model can be used by wildlife man...