when higher prizes lead to lower efforts the impact of favoritism in tournaments we investigate the relationship between tournament prices and effort choices in the presence of favoritism high tournament prizes can decrease agents effort supply when the choice of the winner is not perfectly objective but affected to some extent by personal preferences of an evaluator

china s regional rebound effect based on modelling multi regional cge improving energy efficiency has been regarded as an important measure to reduce energy consumption yet the rebound effect has greatly shrunken the energy saving consequences of this measure to in

the peter principle a theory of decline some have observed that individuals perform worse after being promoted the peter principle which states that people are promoted to their level of incompetence suggests that something is fundamentally misaligned in the promotion process this view is unnecessary and inconsistent with the data below it is argued that ability appears lower after promotion purely as a statistical matter being promoted is evidence that a standard has been met regression to the mean implies that future ability will be lower on average firms optimally account for the regression bias in making promotion decisions but the effect is never eliminated rather than evidence of a mistake the peter principle is a necessary consequence of any promotion rule furthermore firms that take it into account appropriately adopt an optimal strategy usually firms inflate the promotion criterion to offset the peter principle effect and the more important the transitory component is relative to total variation in ability the larger

rank order contracts for a principal with many agents for a principal with many agents rank order contracts remain incentive compatible even when information about agents performance is known only to the principal because the total payment from the principal to all agents taken together is independent of the outcome that occurs under wider conditions than those considered previously in the literature there is shown to exist a rank order contract equivalent exactly or approximately to any nonlinear piece rate contract under those conditions therefore results that depend on the unenforceability of piece rates under such asymmetric information disappear if rank order contracts can be used in principal agent models compensation paid to agents is based on their outputs because their inputs are not public information in this context information is public if it is verifiable in court so that a contract contingent on it is legally enforceable rank order contracts also called tournaments and contests make each agent s compensation a function solely of the ranking of his output relative to the outputs of other agents in contrast individual piece rate contracts make each agent s compensation a function only of his own output lazear and rosen 1981 green and stokey 1983 and nalebuff and stiglitz 1983 all have results comparing the two when agents actions are not observed by the principal but only for the case in which the principal is risk neutral and the utility function of agents additively separable in income and action the main purpose of the present paper is to show that for the case of a continuum of agents these two kinds of contract are in fact formally equivalent or in some cases approximately equivalent under somewhat more general conditions than those considered so far in the

standard promotion practices versus up or out contracts this article develops a theory concerning the choice between standard promotion practices and up or out contracts our theory is based on asymmetric learning and promotion incentives we find that firms employ up or out contracts when firm specific human capital is low and standard promotion practices when it is high we also find that if commitment to a wage floor is feasible and effort provision is important up or out is employed when low and high level jobs are similar these results are consistent with many of the settings in which up or out is typically observed such as law firms and academia

two sided uncertainty and up or out contracts a bilateral moral hazard problem provides a rationale for up or out employment contracts the employer sets a wage higher than opportunity cost to induce the worker to invest in firm specific capital if the individual does not make the grade it is in the firm s interest ex post to fire him had the initial arrangement not included provisions for firing individuals the firm would underreport the value of the employee wrecking the incentive scheme the basic model permits both firm and worker to be risk neutral therefore it admits a straightforward multiperiod extension which we also investigate

reputation and hierarchy in dynamic models of employment the employment relationship with employees ability and their actions both private information thus combining adverse selection with moral hazard is modeled as a repeated game with self enforcing contracts being perfect bayesian nash equilibria under termination contracts the equilibrium contract structure consists of a hierarchy of ranks finite in number even though ability is continuous reputation acts as an effective device for worker discipline without the need for involuntary unemployment selection by bonding is not in general incentive compatible but selection by promotion of employees through the ranks is many other features correspond to observed employment structures

economic and environmental gains of china s fossil energy subsidies reform a rebound effect case study with eimo model abstract energy consumption and efficiency emerged as the hottest topic in the context of china s sustainable development energy subsidies and rebound effect were closely related to this topic while few combinative studies on them with a focus on china this paper employed a co thinking approach focusing on how the energy subsidies reform could mitigate the rebound effect in china and how to achieve an economic and environmental gains that reduced pecuniary spending improved the distorted energy market and reduced energy consumption simultaneously firstly with price gap approach we calculated the total energy subsidies scale of china in 2007 which amounted to582 0 billion cny then we detected and identified rebound effect of china energy consumption with the features furthermore based on china 2007 monetary input output table and energy flow analysis we compiled a hybrid physical energy input and monetary output model eimo to simulate the mitigation effect of subsidies reform results showed that removing energy subsidies would decrease ultimate demand of different economy sectors and reduce the accumulatively physical consumption of coal oil natural gas and electricity by 17 74 13 47 3 64 and 15 82 million tce respectively finally we discussed relevant policy issues on china s energy subsidies reform in depth

bonuses and promotion tournaments theory and evidence standard models of promotion tournaments do not distinguish between wages and bonuses and thus cannot explain variation in the use of bonuses we combine classic and market based tournament theories to develop a model in which wages and bonuses serve distinctly different roles we use this model to derive testable predictions which we test employing both a single firm data set and a data set encompassing a large segment of the finnish economy our empirical analysis supports the testable predictions and shows that our theoretical approach better matches the data than alternative theories of bonus determination based on arguments already in the literature

learning from coarse information biased contests and career profiles an organization s promotion decision between two workers is modelled as a problem of boundedly rational learning about ability the decision maker can bias noisy rank order contests sequentially thereby changing the information they convey the optimal final period bias favours the leader reinforcing his likely ability advantage when optimally biased rank order information is a sufficient statistic for cardinal information the leader is favoured in every period in other environments bias in early periods may i favour the early loser ii be optimal even when the workers are equally rated and iii reduce the favoured worker s promotion chances this paper presents a model of boundedly rational learning by an organization the aims are to represent in a simple form the costs of gathering processing or transmitting information and to analyse their implications for the procedures selected to handle information as well as for the decisions actually made like other recent work on the internal organization of firms this work explores to what extent organizational structure and behaviour as well as organizational performance can be explained by adaptation to the costs associated with information in the learning model we formulate the decision maker not only selects a rule specifying what action to take as a function of his observations but also chooses sequentially the information partitions generating those observations this general problem is interpreted in the context of an organization which needs to make an important promotion decision and which attempts to maximize the value of the information generated during the observation periods that precede the decision one of the motivations for this analysis was the finding by organizational sociologists that earnings and promotions in the later stages of a worker s career are strongly correlated with earnings and promotions in the early stages kanter 1977 rosenbaum 1984 later success is positively associated with early success even when one controls for the effect of observable characteristics likely to affect performance such as education one obvious source of this correlation is differences in ability that persist over time and that are not captured by the observable covariates in this paper we focus on differences in ability which are initially unobservable by organizations and their workers as well as by researchers we present a simple model of an organization trying to learn about differences in ability and show

ex ante versus ex post optimal promotion rules the case of internal promotion i introduction the literature on promotion practices within the firm identifies two distinct roles for a firm s promotion policies promotions serve both as a way for the firm to efficiently assign workers to tasks and as a way for the firm to reward prior performance 1 in this article i explore the time inconsistency problem that arises as a result of the dual nature of the promotion decision in particular i show that the common practice of favoring internal candidates for promotion can be understood as a response by firms to the problem of time inconsistency 2 consider a firm in which promotions serve as a reward for prior expenditures of effort and or prior investments in human capital the optimal promotion policy for this firm depends on the time frame from which we view the problem the ex ante optimal promotion rule is the optimal rule when the problem is viewed from a date prior to young workers deciding to work at this firm this rule takes into account both the assignment aspects of the promotion decision and that promotions serve as a reward for prior performance there is a second relevant rule however because at the date of the promotion decision the effects of promotion serving as a reward for prior performance are in the past for example in a world where the possibility of future promotion serves to increase the effort levels of young workers by the time of the promotion decision those effort choices have already been made hence the ex post optimal rule only takes into account the assignment aspects of the promotion decision the time inconsistency problem that arises is now clear total profits are maximized when the firm follows the ex ante optimal promotion rule but in the absence of commitment this is not how the firm behaves at the time of the promotion decision the firm has an incentive to ignore the effects of promotion serving as a reward for prior performance and instead follow the ex post optimal rule in other words the profits of the firm are decreased because at the time of the promotion decision the firm maximizes current profits and the anticipation of this behavior by workers has deleterious effects on behavior in prior periods in this article i explore a specific example of this time inconsistency problem consider a firm s decision concerning whether to fill a managerial position by promotion from within or by hiring an outsider i show that when confronted with this decision the firm faces the exact situation described that is the ex post optimal rule shows no preference for promotion from within over hiring from the outside whereas the ex ante optimal rule exhibits a preference for promoting from within the logic here is that the possibility of receiving the higher managerial wage in the future reduces the wage required to attract young workers into the firm but only the ex ante optimal rule takes this into account the result is that in the absence of commitment the firm hires from the outside too often the conclusion is that the establishment of an internal labor market in which the firm favors promotion from within can be understood as a way that the firm avoids this time inconsistency problem this result extends a finding in malcomson 1984 that article also shows that an internal labor market in which hiring from the outside is restricted can arise in a world where promotion serves as a reward for prior performance in that work however there is no time inconsistency problem the reason is that malcomson assumes workers are homogeneous and thus at the time of the promotion decision it is weakly optimal for the firm to have all promotions be from within in contrast i assume that workers are heterogeneous and find that if the firm maximizes ex post profits it lowers total profits the result is an internal labor market that not only limits hiring from the outside but also constrains the firm to behave in a manner different from that which maximizes profits at the time the promotion decision is made

promotion turnover and preemptive wage offers this paper examines the strategic promotion and wage decisions of employers when employees may be more valuable to competing firms competing employers must incur a cost to learn the quality of their match with a manager promotion signals that workers are potentially valuable managers in other firms and so can lead to turnover to preempt competition for a manager an employer may offer a wage high enough to discourage competitors from acquiring information and bidding up the wage further or hiring the worker away this transfers wages from good workers to bad more costly information acquisition yields greater expected lifetime wages copyright 1993 by american economic association

job allocation rules and sorting efficiency experimental outcomes in a peter principle environment an important issue in personnel economics is the design of efficient job allocation rules firms often use promotions both to sort workers across jobs and to provide them with incentives however the peter principle states that employees output tends to fall after a promotion lazear 2004 suggests that self selection may improve job allocation efficiency while preserving incentive effects we reproduce this peter principle in the laboratory and compare the efficiency of a promotion standard with subjects self selecting their task we find no evidence of effort distortion as predicted by theory furthermore we find that when the peter principle is not severe promotion rules often dominate self selection efficiency of task assignment results are consistent with imperfect appraisal of transitory ability and a lack of strategic behavior

an economic approach to influence activities in organizations members of organizations spend considerable time effort and ingenuity attempting to influence decision makers such influence activities may bring benefits to the organization but they also involve real costs this essay offers an economic rationale for such influence activity as representing rational self interested behavior in the presence of informational asymmetries and an analysis of how the design of the organization s structure and policies should respond to the incentives for attempting influence it is posited that information valuable for the organization s decision making is directly available only to members of the organization who have some personal stake in the decisions these individuals may then have an incentive to try to manipulate the information they develop and provide in order to influence the resulting decisions to their benefits this can be costly both in degrading the quality of decision making and in diverting the attention and effort of the organization s members from more productive activities the organization has three different methods it can employ to discourage excessive influence activities and to encourage more directly productive uses of time and effort it can limit access to decision makers and participation in decision making it can alter its decision making criteria to favor those performing well in productive activities and it can provide direct financial incentives to encourage the desired allocation of effort it is shown that an efficiently designed organization will use such financial incentives only as a last resort instead it will always first alter its decision participation policies and decisionmaking criteria

rewarding performance by promotion to a different job abstract use of promotions rather than performance related pay to provide incentives can be justified if performance is non verifiable information this does not explain why promotion is to a different job rather than simply a better paid job the effectiveness of tournaments is undermined however if unsuccessful workers are equally suited to higher paid jobs and can engage in bribery or other influence activity a promotion based reward structure with pay tied to jobs can be made immune to such activity if misallocations of employees to jobs are costly to the firm

the impacts of china s household consumption expenditure patterns on energy demand and carbon emissions towards 2050 abstract this paper explores how china s household consumption patterns over the period 2005 2050 influence the total energy demand and carbon dioxide co2 emissions in two baseline scenarios and how it influences carbon prices as well as the economic cost in the corresponding carbon mitigation scenarios to this end we first put forward two possible household consumption expenditure patterns up to 2050 using the working leser model taking into account total expenditure increase and urbanization for comparison both expenditure patterns are then incorporated in a hybrid recursive dynamic computable general equilibrium model the results reveal that as income level increases in the coming decades the direct and indirect household energy requirements and co2 emissions would rise drastically when household expenditure shifts from material products and transport to service oriented goods around 21 000 mtce 1 of primary energy and 45 billion tons of co2 emissions would be saved over the 45 year period from 2005 to 2050 moreover carbon prices in the dematerialized mitigation scenario would fall by 13 in 2050 thus reducing the economic cost

the rebound effect on road freight transport empirical evidence from portugal abstract because a large proportion of total operating costs for transportation companies goes towards energy a reduction in energy operating costs brought about by an increase in fleet fuel efficiency or an increase in operational efficiency results in a change in the relative cost of road freight transportation this fact could result in an increase in the demand for such services if this is true the result would be an increase in total fuel consumption consequently that part of the energy savings obtained through the increased energy efficiency would be lost the existence of a rebound effect is especially important in the road freight transportation sector and is crucial for the definition of a national energy policy in this study data from the road freight transportation sector in portugal for the years of 1987 through 2006 was analyzed it was determined that an increase in energy efficiency did not cause a backfire but did cause a total direct rebound effect of 24 1 in addition fleet operators were more inclined to adopt operational efficiencies than technological fuel efficiencies as a means of increasing the total operational efficiency

the effects of an increase in energy efficiency on the kenya economy abstract there are reasons to believe that improved energy efficiency still is an important energy development policy despite stable oil prices abundant oil supplies and end of the cold war the political reasons are uncertainty of the current gulf situation and prevalent wars in the former eastern bloc countries increasing concern over global environmental problems the existence of imperfect energy markets and the desire for rapid economic growth in developing countries are the other reasons this paper analyses the effects of energy management policies on the kenyan economy using a computable general equilibrium model simulations show that an increase in energy efficiency leads to reduced dependence on foreign energy sources promotion of reliable domestic energy sources promotion of conservation of all forms of energy saves scarce foreign currency and preserves the environment

an empirical study of direct rebound effect for passenger transport in urban china transport sector accounts for about 8 of total energy consumption in china and this share will likely increase in the visible future improving energy efficiency has been considered as a major way for reducing transport energy use whereas its effectiveness might be affected by the rebound effect this paper estimates the direct rebound effect for passenger transport in urban china by using the linear approximation of the almost ideal demand system model and simulation analysis our empirical results reveal the existence of direct rebound effect for passenger transport in urban china a majority of the expected reduction in transport energy consumption from efficiency improvement could be offset due to the existence of rebound effect we have further investigated the relationship between the magnitude of direct rebound effect and households expenditure it was found that the direct rebound effect for passenger transport tends to decline with the increase of per capita household consumption expenditure

reducing rebound effect through fossil subsidies reform a comprehensive evaluation in china abstract china has committed a sharp reduction in its carbon intensity by 2020 and proposed to take integrated policy package including energy subsidy reform to achieve this goal while energy efficiency improvement is the key influencing factor for this goal its effectiveness is significantly determined by rebound effect energy subsidy as an economic regulation policy would significantly affect rebound effect to explore how china s fossil subsidies reform would affect rebound effect this study conducts a comprehensive evaluation based on a multi sector computable general equilibrium cge model rebound effects at different technological improvement levels are investigated and the impacts of different subsidies reform scenarios on mitigating rebound effects and on the whole economy is analyzed the results provide significant policy insights firstly rebound effect does exist in china larger for electricity than for primary energies secondly by removing fossil energy subsides the rebound effect would be effectively mitigated and removing all subsides would reduce the rebound effect most however it would bring significant negative impacts on the macro economy thirdly an integrated policy with removal of fossil energy subsidies and increment of clean energy subsidies would be more effective greatly reducing rebound effect and also bring benefits for both economy and environment our findings would be critical for china s low carbon policy making in the future

up or out contracts a signaling perspective a firm will typically gather information concerning its own workers that is not available to other potential employers while other firms will attempt to reduce this information asymmetry by observing the actions of the initial employer i argue that this process can be important in environments characterized by up or out contracts in that the retention decision can serve as a signal of productivity the article investigates this argument in an environment where up or out contracts are employed because they provide workers with an incentive to accumulate general human capital and where learning takes place in a diffuse fashion

non commitment in performance evaluation and the problem of information distortions abstract auditing is modeled in a sequential game without commitment the manager must decide whether and where to audit a worker s output taking into account all interim information he has obtained the worker will work just hard enough and show it to divert the manager from making an audit or cover up withholding information about his work to make an audit more difficult this usually raises the costs of setting work incentives so incentives are softened sometimes drastically moreover when a worker s on the job information is valuable for entrepreneurial decisions work incentives must be softened to improve the internal flow of information

incentive compensation in a corporate hierarchy abstract a theoretical and empirical analysis of within job and promotion based incentives for middle managers is presented using personnel data from a firm within job incentives are stronger than implied by previous studies evidence is provided that promotions sort employees by ability and also generate incentives promotions are associated with large increases in lifetime earnings as long as performance is sustained in the future there is little evidence that the firm trades off within job and promotion based incentives as predicted instead it appears to use a simple incentive scheme resulting in declining incentives for those passed over for promotion

managerial incentive problems a dynamic perspective the paper studies how a person s concern for a future career may influence his or her incentives to put in effort or make decisions on the job in the model the person s productive abilities are revealed over time through observations of performance there are no explicit output contingent contracts but since the wage in each period is based on expected output and expected output depends on assessed ability an implicit contract links today s performance to future wages an incentive problem arises from the person s ability and desire to influence the learning process and therefore the wage process by taking unobserved actions that affect today s performance the fundamental incongruity in preferences is between the individual s concern for human capital returns and the firm s concern for financial returns the two need be only weakly related it is shown that career motives can be beneficial as well as detrimental depending on how well the two kinds of capital returns are aligned it is well understood by now that informational externalities may place special demands on the organization of economic exchange simple price mediated markets will frequently fail in the presence of asymmetric information in that case more elaborate contractual arrangements have to be used as substitutes for the price system lately considerable effort has been devoted to the analysis of contracting under incomplete information with the objective to understand the range of economic institutions that emerge in response to the failure of the price system the analysis of moral hazard has played a prominent role in this development moral hazard problems arise when for some reason or another transacting parties cannot contract contingent on the delivery of the good for instance in buying labour services it may be that the amount of labour supplied is not directly observable precluding a simple exchange of wage for labour as a partial remedy to this problem an imperfect mutually observed signal about the supply of labour can be used as a proxy in the contract frequently output is taken as such a proxy the drawback is that output is often influenced by other factors than labour input which induce undesirable risk into the contract one is therefore faced with a tradeoff between allocating risk associated with incomplete observability and providing incentives for a proper supply of labour gaining insight into this tradeoff is important not only for understanding contracting in the small e g managerial incentive schemes but also because it is closely related to the fundamental tension between equity and efficiency in the society as a whole while our understanding of moral hazard has advanced a lot in past years it is clear that much work remains an important question that has received little attention until

the rebound effect for heavy industry empirical evidence from china abstract energy efficiency improvement will reduce the effective price of energy services and hence at least partially mitigate original expected energy conservation therefore the magnitude of rebound effect is important for the design and timing of an effective energy conservation policy under the framework of translog cost share equations we estimates the direct rebound effect for heavy industry in china for the first time by conducting an empirical research on the relationship between the direct rebound effect and the ease with which energy services can substitute for other inputs additionally asymmetric price responses are specified in the model for the rebound effect estimation empirical results in our paper indicate that the rebound effect for heavy industry in china is about 74 3 this reveals that energy efficiency improvement can save energy to a certain degree since the rebound effect is less than 100 back fire but most of the expected reduction in heavy industry energy consumption is mitigated these findings prove that energy pricing reforms and energy taxes should be further implemented to achieve effective energy conservation in china s 12th five years plan

managerial task assignment and promotions a two period model of managerial task assignment is developed where the current employer has the advantage of observing the actual performanc e of the manager while outside employers can observe only the assign ments optimal contracts are rigid but the market value of managers is below actual productivity and they are promoted less than is effic ient the author introduces the idea of managers explo iting their information to separate themselves out in the market plac e as a consequence the model has the appealing property of small ab ility based wage differentials within a task as well as large ones b etween tasks copyright 1988 by the econometric society

subjective performance indicators and discretionary bonus pools key indicators of managerial performance are frequently subjective that is they are difficult to specify and or verify for contracting purposes when a principal must rely on subjective information to create incentives for a group of agents discretionary bonus pools are shown to be optimal mechanisms despite their optimality however discretionary bonus pools entail an additional agency cost relative to the benchmark of optimal contracts based on objective and verifiable information our analysis identifies circumstances under which this additional agency cost is small for example the subjective information signals are precise or the number of agents participating in the bonus pool increases when incentive schemes can be based on both objective and subjective performance indicators the relative weights to be placed on alternative signals are shown to differ from the ones predicted by models with objective signals only we also demonstrate that correlation in measurement errors has a different impact on the structure of optimal incentive schemes when the performance indicators are merely subjective

promotion incentives in the public sector evidence from chinese schools abstract we provide evidence that promotion incentives influence the effort of public employees by studying china s system of promotions for teachers predictions from a tournament model of promotion are tested using retrospective panel data on primary and middle school teachers consistent with theory high wage increases for promotion are associated with better performance teachers increase effort in years leading up to promotion eligibility and they reduce effort if they are repeatedly passed over for promotion evaluation scores are positively associated with teacher time use and with student test scores diminishing concerns that evaluations are manipulated

job assignments signalling and efficiency this article analyzes a model in which information about a worker s ability is only directly revealed to the firm employing the worker other firms however use the worker s job assignment as a signal of ability three results recur throughout the analysis first wage rates tend to be more closely associated with jobs than with ability levels second there is frequently an inefficient assignment of workers to jobs i e even when a firm has complete information about a worker s output third the severity of this inefficiency tends to be negatively correlated with the level of firm specific human capital in the economy

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

missing carbon reductions exploring rebound and backfire effects in uk households households are expected to play a pivotal role in reducing the uk s greenhouse gas ghg emissions and the uk government is encouraging specific household actions to help meet its targets however due to the rebound effect only a portion of the ghg emission reductions estimated by simple engineering calculations are generally achieved in practice for example replacing short car journeys by walking or cycling reduces consumption of motor fuels but this frees up money that may be spent on for example purchasing extra clothes or flying on vacation alternatively the money may be put into savings since all of these options lead to ghg emissions total ghg savings may be less than anticipated indeed in some instances emissions may increase a phenomenon known as backfire we estimate that the rebound effect for a combination of three abatement actions by uk households is approximately 34 targeting re spending on goods and services with a low ghg intensity reduces this to a minimum of around 12 while re spending on goods and services with a high ghg intensity leads to backfire our study highlights the importance of shifting consumption to lower ghg intensive categories and investing in low carbon investments

skill versus judgement and the architecture of organisations abstract all activities involve a combination of the exercise of skill and the exercise of judgment this paper distinguishes these types of talent along three dimensions the ease with which their exercise can be monitored the delay before its effects are realised and codifiability of the tasks involved it then presents a two period model of the allocation of multiple tasks within an organization it shows that the incentives for bundling and separation of tasks within such an organization depend on the relative ease of monitoring of the two tasks as well as on the extent of correlation between the talents they require it demonstrates that organizations may rationally place too much emphasis on routine tasks provided these reveal information about talents that may be valuable in non routine tasks and in spite of the fact that the incentives to perform the non routine tasks well will thereby be blunted the results are applied to the work of aid giving agencies to the role of banks in transition economies and to the structure of incentives within the economics profession

the role of promotion in inducing specific human capital acquisition workers routinely carry out activities that increase their productivity with their current employer for which they are not directly compensated for example a worker may be asked to develop relationships with clients or shop floor staff or he may develop a better understanding of how his firm operates firmspecific human capital of this type is difficult to quantify so that it is likely to be difficult to directly compensate the worker for its acquisition this paper is concerned with designing compensation schemes for employees to induce them to collect nonverifiable firm specific human capital if firms develop reputations for fairly compensating workers for skill collection the vagueness of these skills may not provide a significant incentive problem i consider the case where firms do not have the opportunity to develop reputations as a result the acquisition of human capital is subject to a dual moral hazard problem first noted in kahn and huberman 1988 first a worker only collects skills if there is a promise of a higher wage if he does so second the employer has an incentive to claim that the worker has not collected these skills even when he in fact has in order to save on wage costs so on the one hand it is difficult to repay the worker after skills are collected as the firm has an incentive to renege however the worker cannot be repaid before collecting skills as he has no subsequent incentive to collect them following the institutional literature i assume that the firm can commit to a labor contract which attaches wages to different tasks the principal purpose of the paper is to show that the firm can use this ability to commit to a wage scale for different tasks to induce a worker to collect firm specific human capital in the presence of this dual moral hazard problem where the worker is rewarded for skill acquisition by promotion to another job assume that a worker can be assigned to one of two jobs d and

work incentives hierarchy and internal labor markets this paper argues that contracts with payment based on a ranking of employee performance can provide performance incentives even under asymmetric information that prevents payment based on individual performance only being enforceable such contracts also fit with five features of labor markets that have aroused considerable interest 1 hierarchical wage structures 2 internal promotion 3 wage rates that rise with seniority and experience more than productivity 4 the variance of earnings increasing with experience and 5 wage rates attached to jobs rather than individuals with differentials set by administrative procedures rather than by reference to external market wages

the internal economics of the firm evidence from personnel data we analyze twenty years of personnel data from one firm the hierarchical structure is quite simple and stable career movements suggest that the employee s rate of learning and the firm s learning about ability are important there are promotion fast tracks exit rates vary little with tenure or salary the firm has personnel policies like those described in the internal labor markets literature although several theoretical preconditions for ilms such as ports of entry and exit are lacking job levels are important to compensation but there is also substantial individual variation in pay within levels our companion paper in this issue explores the wage policy of this firm

on the merit of equal pay performance manipulation and incentive setting abstract work performance is often difficult to assess thus leaving room for manipulation of commonly used metrics we created a laboratory workplace in which we can precisely assess both work performance along with manipulation activities using two independent experiments we show that whenever pay for performance is used manipulation is pervasive leading to both a waste of organizational resources and a weakening of incentives by contrast paying organizational members equally effectively deters manipulation attempts leading to higher organizational production

empirical evidence of direct rebound effect in catalonia this paper reviews the empirical literature concerning the direct rebound effect in households it briefly analyzes the main theoretical and methodological aspects and finally estimates the magnitude of direct rebound effect for all energy services using electricity in households of catalonia spain using econometric techniques the main results show an estimated direct rebound effect of 35 in the short term and 49 in the long term the existence of a rebound effect reduces the effectiveness of energy efficiency policies

incentives wages and promotions theory and evidence i study an incentive problem that has been largely ignored in the agency literature incentives for repeated human capital investment the optimal contract is very simple but still provides rich implications for incentive and wage structures in large organizations the empirical evidence is presented using personnel records of health insurance claim processors in a large u s insurance company these processors are white collar nonmanagerial female service industry workers a rapidly growing but rarely studied labor group the empirical findings are consistent with the main features of the optimal contract

what field experiments have and have not taught us about managing workers this paper reviews the field experimental evidence on firm employee relationships there is strong evidence that output rises in response to financial incentives but more mixed support for worker reciprocity in response to employer generosity non financial approaches such as worker recognition or adding meaning to mundane tasks can also increase output social relations are central to how firms function and have been shown to have an important impact on the design of incentive schemes what we do not know however far exceeds that which we have learned a broad swathe of important topics including recruiting worker promotion and training are virtually untouched thus far by field experiments

promotions demotions halo effects and the earnings dynamics of american executives this paper explores the determinants of earnings growth in corporate hierarchies using static and dynamic panel data techniques the novelty derives from the distinction between base pay and bonus the asymmetric effects of promotion and demotion and the consideration of dynamic effects we find that the convexity of pay structures is robust to the allowance for unobserved individual heterogeneity demotion has a stronger effect on compensation growth in absolute value than promotion dynamic models indicate that the causal effect of past promotion is positive on the growth in base and total pay but has no significant effect on bonus growth

do increases in energy efficiency improve environmental quality and sustainability governments world wide increasingly see energy efficiency as an important aspect of sustainability however there is a debate in the literature as to whether the impact of improved energy efficiency on reducing energy use might be partially or more than wholly offset through rebound and backfire effects this paper clarifies the theoretical conditions under which such effects would occur and explores their likely significance using a computable general equilibrium cge model of the scottish economy we find that for scotland a general improvement in energy efficiency in the production sectors of the economy initially produces rebound effects that eventually grow into backfire energy use ultimately increases in response to an efficiency gain and the ratio of gdp to co2 emissions falls the economic factors underpinning rebound effects are straightforward energy efficiency improvements result in an effective cut in energy prices which produces output substitution competitiveness and income effects that stimulate energy demands however the presence of strong rebound or even backfire does not mean that efficiency enhancing policies are irrelevant rather it suggests that such policies operating alone are insufficient to generate environmental improvements the implication is that a co ordinated portfolio of energy policies is required

magnification and correction of the acolyte effect initial benefits and ex post settling up in nfl coaching careers what are the long term consequences of initially beneficial high reputation workplace ties under uncertainty acolytes i e subordinates with work connections to high reputation industry leaders

the rebound effect for automobile travel asymmetric response to price changes and novel features of the 2000s abstract previous research suggests that the elasticity of light duty motor vehicle travel with respect to fuel cost known as the rebound effect is modest in size and probably declined in magnitude between the 1960s and the late 1990s however turmoil in energy markets during the early 2000s has raised new questions about the stability of this elasticity using panel data on u s states we revisit the simultaneous equations methodology of small and van dender 2007 and hymel et al 2010 to see whether structural parameters have changed using data through 2009 we confirm the earlier finding of a rebound effect that declines in magnitude with income but we also find an upward shift in its magnitude of about 0 025 during the years 2003 2009 in addition we find that the rebound effect is much greater in magnitude in years when gasoline prices are rising than when they are falling it is also greater during times of media attention and price volatility which explains about half the upward shift just mentioned

performance promotion and the peter principle this paper considers why organizations use promotions rather than just monetary bonuses to motivate employees even though this may conflict with efficient assignment of employees to jobs when performance is unverifiable use of promotion reduces the incentive for managers to be affected by influence activities that would blunt the effectiveness of monetary bonuses when employees are risk neutral use of promotion for incentives need not distort assignments when they are risk averse it may sufficient conditions for this are given the distortion may be either to promote more employees than is efficient the peter principle effect or fewer

promotions and incentives the case of multistage elimination tournaments promotions play an important role for the provision of incentives in firms we analyze incentives in multistage elimination tournaments with controlled laboratory experiments in our two main treatments we compare a two stage tournament to a one stage tournament subjects in the two stage treatment provide excess effort in the first stage both with respect to nash predictions and compared to the strategically equivalent one stage tournament additional control treatments confirm that excess effort in early stages is a robust finding and suggest that above equilibrium effort might be driven by limited degrees of forward looking behavior and subjects deriving nonmonetary value from competing

the greenhouse effect the fallacies in the energy efficiency solution abstract the view that widespread improvements in energy efficiency can by themselves do anything to halt the build up of greenhouse gases around the globe is fundamentally unsound it is based on the same fallacies that underlie the claim that energy savings from improving efficiency can substitute for new energy supply the paper by keepin and kats1 claiming that per tonne of coal not burned improvements in energy efficiency are more cost effective than substituting nuclear for coal fired power is therefore an irrelevancy as far as this debate is concerned reductions is energy intensity of output that are not damaging to the economy are associated with increases not decreases in energy demand at the macroeconomic level even within the boundaries of their own flawed approach their attempt2 to refute the critique of their thesis made by jones3 was little more than misdirected grape shot with no discernable connected thread of argument

optimal promotion policies with the looking glass effect this chapter considers a model where the agent is uncertain about his innate ability and instead makes an inference from others namely the principal s perception as often emphasized in the psychology literature when the principal has superior knowledge about the agent s productivity than the agent himself the principal has an incentive to use promotions strategically to boost the agent s self confidence within this framework the optimal promotion policy depends not only on the agent s current expected ability type but also on the history of his previous job assignments we then use this fact to explain why we rarely observe demotions in organizations

strategic promotion and compensation within a hierarchical firm structure this paper details how the composition of a worker s skills and the non observability of a worker s ability affect wage and promotion paths promotionbased compensation schemes derive naturally from the worker s asymmetrically observed ability promotion takes place over time and is inefficient since employers strategically exploit their knowledge of an able worker s ability conversely employers may be unable to efficiently demote and retain bad managers without paying bonuses employers are led to promote educated employees before their equally or more able but uneducated counterparts explanations for fast track promotions plans and other empirical regularities are provided

teaching un sustainability university sustainability commitments and student experiences of introductory economics the three largest public universities in british columbia canada have signed the talloires declaration committing themselves to promoting sustainability and creating expectations that they will integrate sustainability across the curriculum in order to improve students environmental literacy and stewardship about 40 of north american university students take a mainstream introductory economics course few of these students take economics at more advanced levels as such introductory economics courses are an important vehicle for students to learn economic theory they have the potential to contribute to the knowledge that students can mobilize to foster sustainability interviews were held with 54 students who had recently completed an introductory level mainstream economics course at one of the three universities students reported that introductory economics courses place little emphasis on the environment and sustainability they recalled course content with normative connotations that are problematic from a sustainability perspective and they described how discussion of the limitations of mainstream theory was set aside student reports of the insights introductory economics offers into environmental problems imply that these courses are failing to substantively increase students understanding of sustainability and linkages between the environment and the economy findings suggest that current introductory economics curriculum undermines the universities sustainability commitments

ex post unbalanced tournaments tournaments create strong incentives under the assumption that the competition between the agents is balanced if at the outset one agent is stronger than the other the tournament is ex ante unbalanced and incentives break down handicaps can in this case restore incentives in practice competing agents are often overall equally strong but have different sorts of strengths then competition will typically be unbalanced ex post and incentives break down but handicaps cannot be used we show how a simple means introducing the possibility of a tie can often resolve the problem we examine under what conditions incentives are maximized by ties