Dirk Sliwka

University of Cologne | UOC

We study biases and the informativeness of subjective performance evaluations in an online experiment, testing the implications of a standard formal framework of rational subjective evaluations. In the experiment, subjects in the role of workers perform a real effort task. Subjects in the role of supervisors observe samples of the workers’ output a...

The assignment of individuals with different observable characteristics to different treatments is a central question in designing optimal policies. We study this question in the context of increasing workers’ performance via targeted incentives using machine learning algorithms with worker demographics, personality traits, and preferences as input...

Monetary incentives are widely used to align employee actions with employer objectives. We conducted a field experiment in a retail chain to evaluate whether an attendance bonus could reduce employee absenteeism. Apprentices in 232 stores were randomly assigned to a control group or one of two treatment groups in which a monetary or time-off attend...

We study the profit effects and interplay of two core accounting practices in a field experiment in a large retail chain. In a 2 × 2 factorial design, we vary (1) whether store managers obtain decision-facilitating information on a profit metric and (2) whether they receive performance pay based on the same metric. We find that both practices incre...

We investigate the causal effect of performance pay and conversations about performance in 224 stores of a retail chain implementing a field experiment with a 2x2 factorial design. In the performance pay treatments, managers receive a bonus, which is a simple linear function of the profits achieved above a threshold value. In the performance review...

We study the role of risk aversion and intrinsic motivation in how the payment scheme affects the performance of an online platform’s freelancers. Our RCT varied whether freelancers were only paid a pure sales commission or a lower commission combined with a fixed payment per order to provide insurance against income fluctuations. We do not find ev...

We study the role of employees’ identification to the employer for wage growth. We first show in a formal model that identification implies countervailing effects: Employees with higher identification are more valuable as they exert higher efforts, but have weaker bargaining positions, and less outside options as they search less. Analyzing a novel...

We argue that when contracts are incomplete it is not necessarily in the interest even of money maximizing shareholders to pick a manager who intends to maximize shareholder value. We first show in a formal model, as well as using observational data from over 900 firms and in a series of lab experiments that choosing a manager who has a preference...

We study the performance effects of payment schemes for freelancers offering services on an online platform in an RCT. Under the initial scheme, the firm pays workers a pure sales commission. The intervention reduces the commission rate and adds a fixed payment per processed order to insure workers against earnings risk. Our experiment tests predic...

We test experimentally whether and why principals’ charitable giving affects agents’ efforts. We study a simple principal-agent setting in the lab, where a principal decides whether to donate a fixed amount to a charity and, in the next step, an agent chooses his effort. We argue there are three potential mechanisms that can trigger a higher effort...

We investigate the claim that supervisors do not differentiate enough between high and low performing employees when evaluating performance. In a first step, this claim is illustrated in a formal model showing that rating compression reduces performance and subsequent bonus payments. The effect depends on the precision of performance information an...

Purpose – The purpose of this paper is to introduce a new data source available for researchers with interest in human resources management (HRM) and personnel economics, the Linked Personnel Panel (LPP). Design/methodology/approach – The LPP is a longitudinal and representative employer-employee data set covering establishments in Germany and a s...

Job rotation, i.e. a lateral transfer of an employee between jobs within a company, is frequently used as a means to develop employees, learn about their abilities as well as to motivate them. We investigate the determinants and performance effects of job rotation empirically by analyzing a large panel data-set covering the German banking and finan...

Most firms rely on subjective evaluations by supervisors to assess their employees’ performance. This article discusses the implementation of such appraisal processes, exploring the use of multiple research methods such as the analysis of personnel records, survey data, and lab and field experiments to study them in detail. We argue that the comple...

We study the effects of managerial turnover on earnings management activities in a model in which managers care about their external reputation. We develop an overlapping generations model showing that both outgoing and incoming managers bias reported earnings such that typically very low returns are reported in the first period after a manager has...

How to hire voluntary helpers? We shed new light on this question by reporting a field experiment in which we invited 2859 students to help at the ‘ESA Europe 2012’ conference. Invitation emails varied non-monetary and monetary incentives to convince subjects to offer help. Students could apply to help at the conference and, if so, also specify the...

We investigate wage differences between newly hired and incumbent employees in identical functions using detailed personnel data from a large number of banks. We first show in a formal model of job switching that (i) incumbents earn less than new recruits when human capital is mostly general but (ii) the opposite is the case if specific human capit...

We investigate the relationship between tournament prices and effort choices in the presence of favoritism. High tournament prizes can decrease agents’ effort supply when the choice of the winner is not perfectly objective but affected to some extent by personal preferences of an evaluator.

We empirically investigate possible distortions in subjective performance evaluations. A key hypothesis is that evaluations are more upward biased the closer the social ties between supervisor and appraised employee. We test this hypothesis with a company data set from a call center organization which contains not only subjective assessments but al...

When a key responsibility of a manager is to allocate more or less attractive tasks to subordinates, these subordinates have an incentive to work hard and demonstrate their talents. As a new manager is less well acquainted with these talents this incentive mechanism is reinvigorated after a management change – but only when the team is sufficiently...

We compare up-front tuition fees with graduate taxes for funding higher education. Graduate taxes transfer the volatility in future income from risk-averse students to the risk-neutral state. However, a double moral-hazard problem arises when graduates' work effort and universities' teaching quality are endogenized. Graduate taxes reduce work incen...

We empirically investigate the impact of incentive scheme structure on the degree of cooperation in firms using a unique and representative data set. Combining employee survey data with detailed firm level information on the relative importance of individual, team, and company performance for compensation, we find a significant positive relation be...

This paper investigates the effects of managerial incentives on favoritism in promotion decisions. First, we theoretically show that favoritism leads to a lower quality of promotion decisions and in turn lower efforts. But the effect can be mitigated by pay-for-performance incentives for managers who decide upon promotion. Second, we analyze matche...

“Behaviour cannot be invented in the armchair. It has to be observed.” This statement by Reinhard Selten (1998, p. 414) is particularly true and relevant when designing organisations and incentive schemes with the aim to motivate employees and facilitate coordination and cooperation in firms. Experiments are a powerful tool to observe behaviour und...

We study risk-taking behavior in a simple two person tournament in a theoretical model as well as a laboratory experiment. First, a model is analyzed in which two agents simultaneously decide between a risky and a safe strategy and we allow for all possible degrees of correlation between the outcomes of the risky strategies. We show that risk-takin...

Making use of a unique representative data set, we find clear evidence that risk aversion has a highly significant and substantial negative impact on the probability that an employee's pay is performance contingent, which confirms the well known risk-incentive trade-off.

A real-effort experiment is investigated in which supervisors have to rate the performance of individual workers who in turn receive a bonus payment based on these ratings. We compare a baseline treatment in which supervisors are not restricted in their rating behavior to a forced distribution system in which they have to assign differentiated grad...

We empirically investigate possible distortions in subjective performance evaluations. A key hypothesis is that evaluations are more upward biased the closer the social ties between supervisor and appraised employee. We test this hypothesis with a company data set from a call center organization which contains not only subjective assessments but al...

We investigate the use of performance appraisal (PA) in German firms. First, we derive hypotheses on individual and job-based determinants of PA usage. Based on a representative German data set on individual employees, we test these hypotheses and also explore the impact of PA on performance pay and further career prospects. The results include tha...

We discuss a principal–agent model in which the principal has the opportunity to include a noncompete agreement in the employment contract. We show that not imposing such an agreement can be beneficial for the principal, as the possibility to leave the firm generates implicit incentives for the agent. The principal prefers to impose such a clause i...

We investigate the use of performance appraisal (PA) in German Firms. First, we derive hypotheses on individual and job based determinants of PA usage. Based on a representative German data set on individual employees, we test these hypotheses and also explore the impact of PA on performance pay and further career prospects. The results include tha...

We study the impact of wage increases on job satisfaction theoretically and empirically. To do this, we apply a utility function that rises with the absolute wage level as well as with wage increases. We show that when employees can influence their wages by exerting effort, myopic utility maximization directly implies increasing and concave wage pr...

We discuss a principal-agent model in which the principal has the opportunity to include a non-compete agreement in the employment contract. We show that if the agent faces limited liability and there is an incentive problem the principal prefers not to impose such a clause if and only if the principal's profits from entering the market are suffici...

A main prediction of agency theory is the well known risk-incentive trade-off. Incentive contracts should be found in environments with little uncertainty and for agents with low degrees of risk aversion. There is an ongoing debate in the literature about the first trade-off. Due to lack of data, there has so far been hardly any empirical evidence...

The paper proves that in two-player logit form symmetric contests with concave success function, commitment to a particular strategy does not increase a player's payoff, while in contests with more than two players it does. The paper also provides a contest-like game in which commitment does not increase a player''s payoff for any number of players...

A simple principal agent problem is experimentally investigated in which a principal repeatedly sets a wage and an agent responds by choosing an effort level. The principal's payoff is determined by the agent's effort. In a first setting the principal can only set a fixed wage in each period. In a second setting the principal has the possibility to...

Many experiments and field studies indicate that most individuals are not purely motivated by material self-interest but also care about the well being of others. In this paper, we examine tournaments among inequity averse agents, who dislike disadvantageous inequity (envy) and advantageous inequity (compassion). It turns out that inequity averse a...

A tournament is examined in which two agents with different abilities choose efforts as well as risks. According to the previous literature, the more (less) able agent should choose a low (high) risk strategy, because the first one does not want to imperil his favorable position, whereas the last one can only gain by increasing risk. We show that t...

The impact of transparency on the extent of reciprocal behavior is investigated in a simple repeated gift exchange experiment where principals set wages and agents respond by choosing effort levels that, with a random component, determine principals’ payoff. It is shown that direct reciprocal behavior is much stronger in a more transparent situatio...

We experimentally investigate a simple version of Holmström's career concerns model in which firms compete for agents in two consecutive periods. Profits of firms are determined by agents’ unknown ability and the effort they choose. Before making second-period wage offers firms are informed about first-period profits. In a different treatment firms...

The impact of wage increases on job satisfaction is explored. First, it is empirically confirmed that current job satisfaction rises with the absolute wage level as well as with wage increases. Second, a basic job satisfaction function is constructed based on the empirical results, and theoretical implications are analyzed. Myopic maximization of s...

Es wird der Einfluss von impliziten Anreizen durch Karriereperspektiven auf das Leistungsverhalten von realen Agenten empirisch untersucht. Dies erscheint notwendig, da die Anreizeffekte zwar theoretisch belegt sind, ihre Relevanz für tatsächliches Verhalten von Arbeitnehmern jedoch noch weitgehend ungeklärt ist. ■ In einem experimentellen Arbeitsm...

In this paper, we combine the strategic delegation approach of Fershtman–Judd–Sklivas with contests. Here a contest means the expenditure of resources in order to influence the allocation of a fixed demand for a certain product. At the first stage of the game, firm owners decide on incentive schemes for their managers. At the second stage, managers...

The optimal incentives for a team are analyzed in a principal-agent model. It is shown that it can be beneficial to make an agent’s compensation positively dependent on another agent’s success even when tasks are technologically independent. The introduction of team compensation induces implicit cooperation and mutual monitoring. This is modeled ex...

We examine the physical and mental health effects of providing care to an elderly mother on the adult child caregiver. We address the endogeneity of the selection in and out of caregiving using an instrumental variable approach, and carefully control for baseline health and work status of the adult child using fixed effects and Arellano-Bond estima...