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Contribution Details
| Type | Conference Presentation |
| Scope | Discipline-based scholarship |
| Title | Incentive effects of bonus taxes |
| Organization Unit | |
| Authors |
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| Presentation Type | lecture |
| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Publisher | UZH Business Working Paper Series |
| Event Title | 15th Annual Conference of "The International Society for New Institutional Economics (ISNIE)" |
| Event Type | conference |
| Event Location | Stanford (USA) |
| Event Start Date | June 16 - 2011 |
| Event End Date | June 18 - 2011 |
| Abstract Text | Several countries have implemented bonus taxes for corporate executives in response to the financial crisis of 2007-2010. Using a principal-agent model, this paper analyzes how bonus taxes affect the agent's effort, compensation package, tax revenue and social welfare. We show that, contrary to its intention, a bonus tax may even increase the bonus rate and decrease the fixed salary. In addition, a bonus tax can induce the principal to pay higher bonuses even though the agent's effort always decreases. Finally, a bonus tax decreases social welfare unless the social planner places a sufficiently high weight on tax revenue. |
| Digital Object Identifier | 10.1016/j.jebo.2013.02.002 |
| Other Identification Number | merlin-id:6352 |
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