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Title:Performance pay and risk aversion PDF Logo
Authors:Grund, Christian
Sliwka, Dirk
Issue Date:2006
Series/Report no.:IZA Discussion Papers 2012
Abstract:A main prediction of agency theory is the well known risk-incentive trade-off. Incentive contracts should be found in environments with little uncertainty and for agents with low degrees of risk aversion. There is an ongoing debate in the literature about the first trade-off. Due to lack of data, there has so far been hardly any empirical evidence about the second. Making use of a unique representative data set, we find clear evidence that risk aversion has a highly significant and substantial negative impact on the probability that an employee's pay is performance contingent.
Subjects:risk
incentives
agency theory
risk aversion
performance appraisal
pay for performance
GSOEP
JEL:J33
M52
D80
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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