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American Economic Review Vol. 101 No. 2 2011

Deferred Compensation in Multiperiod Labor Contracts: An Experimental Test of Lazear's Model

Steffen Huck1; Andrew Seltzer2; Brian Wallace3

1 University College London, Gower Street, London WC1E 6BT, United Kingdom, ELSE, and IZA. · 2 Royal Holloway, University of London, Egham TW20 0EX. · 3 University College London, Gower Street, London WC1E 6BT, United Kingdom.

Abstract

This paper provides the first experimental test of Edward Lazear's (1979) model of deferred compensation. We examine the relation ship 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.

DOI
10.1257/aer.101.2.819
Volume
101
Issue
2
Pages
819-843
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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