I examine whether reference points can provide an explanation for rigid wages in recessions. Even though a recession provides a good reason to adjust wages downward, workers' perception of a "fair wage" may depend on their previous wage, their reference point. Using a laboratory experiment, I...

This paper presents evidence on the short and long-term impact of the first COVID-19 wave on India's rural youth. We interviewed about 2,000 vocational trainees from Bihar and Jharkhand between March 2020 and March 2021. We report a stark difference between men and women: while many male workers...

Can a company attract a different type of employee by changing its compensation scheme? Is it sufficient to pay more to increase employees’ motivation? Should a firm provide evaluation feedback to employees based on their absolute or their relative performance? Laboratory experiments can help...

We estimate the effects of labor market entry conditions on wages for male individuals first entering the Austrian labor market between 1978 and 2000. We find a large negative effect of unfavorable entry conditions on starting wages as well as a sizeable negative long-run effect. Specifically,...

We suggest a parsimonious dynamic agency model in which workers have status concerns. A firm is a promotion hierarchy in which a worker's status depends on past performance. We investigate the optimality of two types of promotion hierarchies: (i) internal labor markets, in which agents have a...

While theorists differ sharply on the expected economic impact of stock options, typically empirical work has found a positive association between option schemes and firm productivity. However, existing data are limited and may not enable reliable investigation of the productivity effects of...

In this paper we study whether stock option schemes affect firm technical inefficiency. We estimate Cobb-Douglas stochastic production frontier models using a novel panel data set on the publicly listed Finnish firms in the manufacturing and ICT sectors over the period from 1992 to 2002. We find...

This paper explores the consequences of grouping workers into diverse divisions on the performance of employees using a dataset containing the detailed personnel records of a large U.S. firm from 1989-1994. In particular, I examine the effects of demographic dissimilarity among co-workers,...

Individuals who compete in a contest-like situation (for example, in sports, in promotion tournaments, or in an appointment contest) may have an incentive to illegally utilize resources in order to improve their relative positions. We analyze such doping within a tournament game between two...

Splitting leagues or tournaments seems to be puzzling when agents are homogeneous and splitting leads to a negative competition effect. However, it can be shown that the principal can nevertheless benefit from splitting. First, splitting can be used as a divide-and-rule strategy by the principal...