TY  - RPRT
        AU  - Gersbach, Hans
AU  - Glazer, Amihai
        TI  - High Compensation Creates a Ratchet Effect
        PY  - 2004/May/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 1143
        UR  - https://www.iza.org/index.php/publications/dp1143
        AB  - We consider a firm which pays a worker for his effort over several periods. The more the firm
pays in one period, the wealthier the worker is in the following periods, and so the more he
must be paid for a given effort. This wealth effect can induce an employer to pay little initially
and more later on. For related reasons, the worker may work harder than the employer
prefers. The incentive contracts firms offer may therefore cap the worker’s earnings. Lastly,
this wealth ratchet effect can induce excessive firing and turnover.
        KW  - wealth effects
KW  - Ratchet effects
KW  - moral hazard
KW  - compensation
KW  - principal-agent
KW  - high-powered incentives
        ER  -