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Incentives and earnings growth

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  • Frederiksen, Anders

Abstract

The career prospects of newly recruited employees differ substantially within an organization. The stars experience considerable growth in earnings; others can hardly maintain their entry salaries. This article sheds light on the mechanisms generating the observed heterogeneity in earnings growth by investigating the effects that explicit short-run incentives and implicit incentives have on earnings growth. The model's predictions are tested using personnel records from a large bank and are found to be consistent with the observed earnings growth during the first half of the employees’ careers.

Suggested Citation

  • Frederiksen, Anders, 2013. "Incentives and earnings growth," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 97-107.
    • Handle: RePEc:eee:jeborg:v:85:y:2013:i:c:p:97-107
    DOI: 10.1016/j.jebo.2012.11.005
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    References listed on IDEAS

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    Cited by:

    1. Ferey, Antoine & Haufler, Andreas & Perroni, Carlo, 2023. "Incentives, globalization, and redistribution," Journal of Public Economics, Elsevier, vol. 224(C).
    2. Frederiksen, Anders & Lange, Fabian & Kriechel, Ben, 2017. "Subjective performance evaluations and employee careers," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 408-429.

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    More about this item

    Keywords

    Explicit incentives; Implicit incentives; Performance; Earnings growth; Personnel economics;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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