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Journal Article

Incentives, Productivity, and Labor Contracts

Edward P. Lazear and Robert L. Moore
The Quarterly Journal of Economics
Vol. 99, No. 2 (May, 1984), pp. 275-296
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/1885526
Page Count: 22
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Incentives, Productivity, and Labor Contracts
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Abstract

The relationship between age-earnings profiles and worker incentives is examined by contrasting wage and salary workers with the self-employed. It is argued that the steepness of wage and salary workers' age-earnings profiles reflects that desire to provide work incentives to those workers. Since self-employed workers do not face this agency problem, they are used as a benchmark to gauge productivity. Empirical support of the proposition is provided, and the effects of human capital accumulation are separated empirically from incentive effective. The most important conclusion is that under some strong assumptions, most of the slope in age-earnings profiles is accounted for by the desire to provide incentives, rather than by on-the-job training.

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