@TechReport{iza:izadps:dp16481,
            	author={Gaur, Meghana and Grigsby, John and Hazell, Jonathon and Ndiaye, Abdoulaye},
            	title={Bonus Question: Does Flexible Incentive Pay Dampen Unemployment Dynamics?},
            	year={2023},
	month={Sep},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={16481},
            	url={https://www.iza.org/publications/dp16481},
	abstract={We introduce dynamic incentive contracts into a model of unemployment dynamics and present three results. First, wage cyclicality from incentives does not dampen unemployment dynamics: the response of unemployment to shocks is first-order equivalent in an economy with flexible incentive pay and without bargaining, vis-a-vis an economy with rigid wages. Second, wage cyclicality from bargaining dampens unemployment dynamics through the standard mechanism. Third, our calibrated model suggests 46% of wage cyclicality in the data arises from incentives. A standard model without incentives calibrated to weakly procyclical wages, matches unemployment dynamics in our incentive pay model calibrated to strongly procyclical wages.},
	keywords={incentive contracts;unemployment dynamics;wage rigidity},
            }