An Empirical Analysis of Risk, Incentives, and the Delegation of Worker Authority
| dc.contributor.author | DeVaro, Jed | |
| dc.contributor.author | Kurtulus, Fidan Ana | |
| dc.date.accessioned | 2020-11-17T16:58:08Z | |
| dc.date.available | 2020-11-17T16:58:08Z | |
| dc.date.issued | 2007-06-20 | |
| dc.description.abstract | [Excerpt] The notion of a negative relationship between risk and incentives is a central prediction of agency theory. A vast literature has failed to find consistent empirical support for this prediction, with some studies finding a positive relationship, some a negative relationship, and some no relationship at all. Prendergast’s (2002) theory extends the principal-agent model to incorporate the delegation of worker authority, showing that a positive relationship between risk and incentives can arise and potentially explaining the mixed results from empirical tests. In this paper, we empirically test Prendergast’s theory. Using a large, nationally-representative cross section of British establishments that includes information both from employers and from multiple workers in each establishment, we address four empirical questions: 1) Is there evidence of a risk-incentives tradeoff as predicted by the principal-agent model? 2) Is there evidence of a positive relationship between incentive pay and the delegation of worker authority as assumed by Prendergast? 3) Is there evidence of a positive relationship between risk and authority as Prendergast also assumes? 4) Is there empirical support for the main testable implication of Prendergast’s model, namely that the evidence favoring a risk-incentives tradeoff should strengthen when authority controls are added to the model? Our answers are affirmative for all four questions. | |
| dc.description.legacydownloads | DeVaro1_An_Empirical_Analysis_of_Risk__Incentives__and_the_Delegation.pdf: 890 downloads, before Oct. 1, 2020. | |
| dc.identifier.other | 344001 | |
| dc.identifier.uri | https://hdl.handle.net/1813/74710 | |
| dc.language.iso | en_US | |
| dc.subject | Agency Theory | |
| dc.subject | Risk versus Incentives Tradeoff | |
| dc.subject | Delegation of Worker Authority | |
| dc.subject | Performance Pay | |
| dc.title | An Empirical Analysis of Risk, Incentives, and the Delegation of Worker Authority | |
| dc.type | article | |
| local.authorAffiliation | DeVaro, Jed: jld48@cornell.edu Cornell University | |
| local.authorAffiliation | Kurtulus, Fidan Ana: fak4@cornell.edu Cornell University |
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