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Contribution Details
| Type | Conference or Workshop Paper |
| Scope | Discipline-based scholarship |
| Published in Proceedings | Yes |
| Title | Managerial accountability for payroll expense and firm-size wage effects |
| Organization Unit | |
| Authors |
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| Presentation Type | paper |
| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Event Title | 26th Annual Congress of the European Economic Association |
| Event Type | conference |
| Event Location | Oslo |
| Event Start Date | August 25 - 2011 |
| Event End Date | August 29 - 2011 |
| Abstract Text | We argue that job performance appraisal is an agency problem between a manager and his employees featuring asymmetric transfer values: Ratings given by the manager are money equivalent for the employees but only partially so for the manager. The asymmetry assumption is based on evidence that managers are not held fully accountable for payroll expense incurred, which, we argue, stems from the misalignment of managerial compensation with the profits of the firm. Other evidence also shows that the problem of managerial unaccountability is more aggravated in larger firms. In this paper, we develop a nested agency model of economic organization of a firm with unaccountable managers, which in equilibrium obtains the firm-size wage effects the large-firm wage premium and inverse relationship between firm size and wage dispersion. We also relate and explain the compression of ratings phenomenon from literature on organizational psychology. |
| Official URL | http://www.eea-esem.com/files/papers/eea-esem/2011/1542/Empl%20Wage%20Sched_v2.pdf |
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| Other Identification Number | merlin-id:6127 |
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