High compensation creates a ratchet effect
By: by Hans Gersbach, Amihai Glazer.
Contributors: Glazer, Amihai.
Series: Discussion paper ;; no. 1143; Discussion paper (Forschungsinstitut zur Zukunft der Arbeit : Online) ;; no. 1143
Publisher: IZA
Published: 2004
Place of publication: Bonn, Germany
Language: eng
Format: Electronic resource
Description: "We consider a firm which pays a worker for his effort over several periods. The more the firm pays in one period, the wealthier the worker is in the following periods, and so the more he must be paid for a given effort. This wealth effect can induce an employer to pay little initially and more later on. For related reasons, the worker may work harder than the employer prefers. The incentive contracts firms offer may therefore cap the worker's earnings. Lastly, this wealth ratchet effect can induce excessive firing and turnover"--Forschungsinstitut zur Zukunft der Arbeit web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 5/18/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.