Chapter 20

Personnel Economics: Hiring and Incentives*

Oyer Paul*, *Stanford GSB and NBER

Schaefer Scott**, **David Eccles School of Business and Institute for Public and International Affairs, University of Utah

Abstract

We survey the Personnel Economics literature, focusing on how firms establish, maintain, and end employment relationships and on how firms provide incentives to employees. This literature has been very successful in generating models and empirical work about incentive systems. Some of the unanswered questions in this area—for example, the empirical relevance of the risk/incentive tradeoff and the question of whether CEO pay arrangements reflect competitive markets and efficient contracting—are likely to be very difficult to ...

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