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Incentive Pay, Worker Effort, and Trade Protection

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  • Das, Satya P

Abstract

Positive and normative aspects of trade policy are examined when firms offer incentive pay to workers, such as piece-rate pay and profit sharing, to deal with worker moral hazard. Protection increases the incentive pay rate. Its effect on effort depends upon the degree of labor mobility and the type of the incentive pay. In the presence of a piece-rate pay, protection induces second-order welfare losses. But in the presence of profit sharing, there is a direct impact of protection on the incentive-compatibility constraint facing firms and hence there is a first order positive effect on welfare. Copyright 1996 by Blackwell Publishing Ltd.

Suggested Citation

  • Das, Satya P, 1996. "Incentive Pay, Worker Effort, and Trade Protection," Review of International Economics, Wiley Blackwell, vol. 4(2), pages 141-151, June.
    • Handle: RePEc:bla:reviec:v:4:y:1996:i:2:p:141-51
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    Cited by:

    1. Stadler Manfred & Pull Kerstin, 2015. "Piece Rates vs. Contests in Product Market Competition," Review of Economics, De Gruyter, vol. 66(3), pages 273-287, December.
    2. Pull, Kerstin & Stadler, Manfred, 2015. "Contests vs. piece rates in product market competition," University of Tübingen Working Papers in Business and Economics 85, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    3. Das, Satya P., 1997. "Strategic managerial delegation and trade policy," Journal of International Economics, Elsevier, vol. 43(1-2), pages 173-188, August.

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