Firms hiring fresh graduates face uncertainty on the future productivity of workers. Theory suggests that starting wages reflect this, with lower pay for greater uncertainty. We use the dispersion of exam grades within a field of education as an indicator of the unobserved heterogeneity that...

This paper investigates whether observed executive compensation contracts are designed to provide risk-taking incentives in addition to effort incentives. We develop a stylized principal-agent model that captures the interdependence between firm risk and managerial incentives. We calibrate the...

Inspired by a recent observation about an online retail company, this paper explains why a firm may find it optimal to offer an exit bonus to recent hires so as to induce self-selection. We study a double adverse selection problem, in which the principal can neither observe agents’ commitment...