Performance pay and assortative matching

Peer reviewedPostprin

Leading-effect vs. Risk-taking in Dynamic Tournaments: Evidence from a Real-life Randomized Experiment

Two 'order effects' may emerge in dynamic tournaments with information feedback. First, participants adjust effort across stages, which could advantage the leading participant who faces a larger 'effective prize' after an initial victory (leading-effect). Second, participants lagging behind may increase risk at the final stage as they have 'nothing to lose' (risk-taking). We use a randomized natural experiment in professional two-game soccer tournaments where the treatment (order of a stage-specific advantage) and team characteristics, e.g. ability, are independent. We develop an identification strategy to test for leading-effects controlling for risk-taking. We find no evidence of leading-effects and negligible risk-taking effects

Financial Structure and Economic Welfare: Applied General Equilibrium Development Economics

This review provides a common framework for researchers thinking about the next generation of micro-founded macro models of growth, inequality, and financial deepening, as well as direction for policy makers targeting microfinance programs to alleviate poverty. Topics include treatment of financial structure general equilibrium models: testing for as-if-complete markets or other financial underpinnings; examining dual-sector models with both a perfectly intermediated sector and a sector in financial autarky, as well as a second generation of these models that embeds information problems and other obstacles to trade; designing surveys to capture measures of income, investment/savings, and flow of funds; and aggregating individuals and households to the level of network, village, or national economy. The review concludes with new directions that overcome conceptual and computational limitations.National Science Foundation (U.S.)National Institutes of Health (U.S.)Templeton FoundationBill & Melinda Gates Foundatio

A glimpse into the differential topology and geometry of optimal transport

This note exposes the differential topology and geometry underlying some of the basic phenomena of optimal transportation. It surveys basic questions concerning Monge maps and Kantorovich measures: existence and regularity of the former, uniqueness of the latter, and estimates for the dimension of its support, as well as the associated linear programming duality. It shows the answers to these questions concern the differential geometry and topology of the chosen transportation cost. It also establishes new connections --- some heuristic and others rigorous --- based on the properties of the cross-difference of this cost, and its Taylor expansion at the diagonal.Comment: 27 page

Promotion Determinants in Corporate Hierarchies: An Examination of Fast Tracks and Functional Area

This chapter estimates a dynamic reduced-form model of intra-firm promotions using an employer–employee panel of over 300 of the largest corporations in the United States in the period from 1981 to 1988. The estimation conditions on unobserved individual heterogeneity and allows for both an endogenous initial condition and sample attrition linked to individual heterogeneity in demonstrating the relative importance of variables that influence promotion. The role of the executive’s functional area in promotion is considered along with the existence and source of promotion fast tracks. We find that while the principal determinant of promotions is unobserved individual heterogeneity, functional area has a high explanatory power, resulting in promotion probabilities that differ by functional area for executives at the same reporting level and firm. No evidence is found that an executive’s recent speed of advancement in pay grade has a positive causal impact on in-sample promotions after conditioning on the executive’s career speed of advancement, except for the lowest level executives the data. Fast tracks appear to largely result from heterogeneity in persistent individual characteristics, not from an inherent benefit in recent advancement itself