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Managerial accountability for payroll expense and firm-size wage effects


Zubrickas, Robertas (2011). Managerial accountability for payroll expense and firm-size wage effects. In: EALE, 23rd Annual Conference, Paphos, Cyprus, 22 September 2011 - 24 September 2011, 1-40.

Abstract

We argue that job performance appraisal is an agency problem with asymmetric transfer values: an employee is paid in proportion to the rating received from his line manager, who only partially internalizes the resultant payroll cost. This asymmetry in rating valuations is based on evidence that managers are not fully accountable for payroll expense, with the degree of unaccountability increasing in firm size. We develop a nested agency model of economic organization of a firm with unaccountable managers, which in equilibrium obtains the firm-size wage effects - the large-firm wage premium and inverse relationship between firm size and wage dispersion.

We argue that job performance appraisal is an agency problem with asymmetric transfer values: an employee is paid in proportion to the rating received from his line manager, who only partially internalizes the resultant payroll cost. This asymmetry in rating valuations is based on evidence that managers are not fully accountable for payroll expense, with the degree of unaccountability increasing in firm size. We develop a nested agency model of economic organization of a firm with unaccountable managers, which in equilibrium obtains the firm-size wage effects - the large-firm wage premium and inverse relationship between firm size and wage dispersion.

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Additional indexing

Item Type:Conference or Workshop Item (Paper), refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Event End Date:24 September 2011
Deposited On:22 Feb 2012 15:46
Last Modified:05 Apr 2016 15:39
Official URL:http://www.eale.nl/Conference2011/Programme/papers%20sessie%20D/Robertas%20Zubrickas.pdf
Related URLs:http://www.eale.nl/Conference2011/Conference.htm
Other Identification Number:merlin-id:6129
Permanent URL: https://doi.org/10.5167/uzh-59810

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