AN EMPIRICAL ANALYSIS OF RISK, INCENTIVES AND THE DELEGATION OF WORKER AUTHORITY
The authors empirically test Prendergast's (2002) theory that incorporates the delegation of worker authority into the principal-agent model to explain the lack of consistent empirical support for a tradeoff between risk and incentives. Using data from the 1998 British WERS, the authors investi...
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| Published in | Industrial & labor relations review Vol. 63; no. 4; pp. 641 - 661 |
|---|---|
| Main Authors | , |
| Format | Journal Article |
| Language | English |
| Published |
Los Angeles, CA
School of Industrial and Labor Relations, Cornell University
01.07.2010
SAGE Publications ILR Review, Cornell University, ILR School SAGE PUBLICATIONS, INC |
| Series | Industrial and Labor Relations Review |
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| Abstract | The authors empirically test Prendergast's (2002) theory that incorporates the delegation of worker authority into the principal-agent model to explain the lack of consistent empirical support for a tradeoff between risk and incentives. Using data from the 1998 British WERS, the authors investigate whether there is: 1) evidence of a risk-incentives tradeoff as predicted by the principal-agent model; 2) evidence of a positive relationship between incentive pay and the delegation of worker authority; 3) evidence of a positive relationship between risk and authority; 4) 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 empirical model. The answers are affirmative for all four questions, thereby providing evidence clarifying the relationship between risk and incentive pay and how managers optimally bundle incentive pay and the delegation of worker decision rights to cope with risk. |
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| AbstractList | The authors empirically test Prendergast's (2002) theory that incorporates the delegation of worker authority into the principal-agent model to explain the lack of consistent empirical support for a tradeoff between risk and incentives. Using data from the 1998 British WERS, the authors investigate whether there is: 1) evidence of a risk-incentives tradeoff as predicted by the principal-agent model; 2) evidence of a positive relationship between incentive pay and the delegation of worker authority; 3) evidence of a positive relationship between risk and authority; 4) 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 empirical model. The answers are affirmative for all four questions, thereby providing evidence clarifying the relationship between risk and incentive pay and how managers optimally bundle incentive pay and the delegation of worker decision rights to cope with risk. The authors empirically test Prendergast’s (2002) theory that incorporates the delegation of worker authority into the principal-agent model to explain the lack of consistent empirical support for a trade-off between risk and incentives. Using data from the 1998 British WERS, the authors investigate whether there is: 1) evidence of a risk-incentives trade-off as predicted by the principal-agent model; 2) evidence of a positive relationship between incentive pay and the delegation of worker authority; 3) evidence of a positive relationship between risk and authority; 4) support for the main testable implication of Prendergast’s model, namely that the evidence favoring a risk-incentives trade-off should strengthen when authority controls are added to the empirical model. The answers are affirmative for all four questions, thereby providing evidence clarifying the relationship between risk and incentive pay and how managers optimally bundle incentive pay and the delegation of worker decision rights to cope with risk. The authors empirically test Prendergast's (2002) theory that incorporates the delegation of worker authority into the principal-agent model to explain the lack of consistent empirical support for a tradeoff between risk and incentives. Using data from the 1998 British WERS, the authors investigate whether there is: 1) evidence of a risk-incentives tradeoff as predicted by the principal-agent model; 2) evidence of a positive relationship between incentive pay and the delegation of worker authority; 3) evidence of a positive relationship between risk and authority; 4) 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 empirical model. The answers are affirmative for all four questions, thereby providing evidence clarifying the relationship between risk and incentive pay and how managers optimally bundle incentive pay and the delegation of worker decision rights to cope with risk. Adapted from the source document. Reprinted by permission of Cornell University, New York State School of Industrial and Labor Relations The authors empirically test Prendergast's (2002) theory that incorporates the delegation of worker authority into the principal-agent model to explain the lack of consistent empirical support for a tradeoff between risk and incentives. Using data from the 1998 British WERS, the authors investigate whether there is: 1) evidence of a risk-incentives tradeoff as predicted by the principal-agent model; 2) evidence of a positive relationship between incentive pay and the delegation of worker authority; 3) evidence of a positive relationship between risk and authority; 4) 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 empirical model. The answers are affirmative for all four questions, thereby providing evidence clarifying the relationship between risk and incentive pay and how managers optimally bundle incentive pay and the delegation of worker decision rights to cope with risk. Adapted from the source document. |
| Author | DEVARO, JED KURTULUS, FIDAN ANA |
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| Snippet | The authors empirically test Prendergast's (2002) theory that incorporates the delegation of worker authority into the principal-agent model to explain the... The authors empirically test Prendergast’s (2002) theory that incorporates the delegation of worker authority into the principal-agent model to explain the... |
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| SubjectTerms | Authority Authority control Decisions Delegation Delegation of authority Earnings Empirical evidence Employees Incentive pay Incentives Labor relations Labor unionization Labour economics Modeling Modelling Principal-agent models Principal-agent theory Private sector Rights Risk Risk aversion Trade-off United Kingdom Work incentives Workers Workplaces |
| Title | AN EMPIRICAL ANALYSIS OF RISK, INCENTIVES AND THE DELEGATION OF WORKER AUTHORITY |
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