Deferred Compensation in Multiperiod Labor Contracts: An Experimental Test of Lazear's Model
- (pp. 819-43)
Abstract
This paper provides the first experimental test of Edward Lazear's (1979) model of deferred compensation. We examine the relationship between firms' wage offers and workers' effort supply in a multi-period environment. If firms can ex ante commit to a wage schedule with deferred compensation, workers should respond by supplying sufficient effort to avoid dismissal. We contrast this full-commitment case to controls with no commitment and computer-generated wages in order to examine the roles of monetary incentives, social preferences, and reciprocity. Finally, we examine a setup without formal commitment, but where firms can build a reputation for paying deferred wages. (JEL D86, J22, J31, J33, J41)Citation
Huck, Steffen, Andrew J. Seltzer, and Brian Wallace. 2011. "Deferred Compensation in Multiperiod Labor Contracts: An Experimental Test of Lazear's Model." American Economic Review, 101 (2): 819-43. DOI: 10.1257/aer.101.2.819Additional Materials
JEL Classification
- D86 Economics of Contract: Theory
- J22 Time Allocation and Labor Supply
- J31 Wage Level and Structure; Wage Differentials
- J33 Compensation Packages; Payment Methods
- J41 Labor Contracts