Minimal rights based solidarity

In a model where individuals with different levels of skills exert different levels of effort, we propose to use individuals’ minimal rights to divide an extra amount of income generated by a change in the skill profile. Priority is given to individuals with a positive minimal right which ensures that the way redistribution is performed depends on the total sum of income available in society. We characterize two families of minimal rights based Egalitarian mechanisms. One family guarantees each individual her claim when claims are feasible. The other family guarantees a non-negative income after redistribution for all individuals.     

Lorenz Dominance and Non-welfaristic Redistribution

Our concern is for income inequalities that may result from non-welfaristic redistribution schemes. We show that for large classes of income functions Lorenz dominance results can be found in the comparison of two egalitarian equivalent mechanisms. Comparisons of different conditionally egalitarian mechanisms only yield poverty dominance results. In general, no egalitarian equivalent mechanism can be Lorenz dominated by a conditionally egalitarian mechanism. Our analysis stresses the need for accurate empirical estimates of the pre-tax income function and of the distributions of responsibility and compensation characteristics. We thank the Editor, Marc Fleurbaey and two anonymous referees, Geert Dhaene and seminar/conference participants at UAP-workshop (Namur, 2003), ‘Welfarist and non-welfarist approaches to public economics’ (Ghent, 2004), SED (Palma, 2004), SSC&W (Osaka, 2004) and IIPF (Milan, 2004) for helpful comments and suggestions. Financial support from the Federal Public Planning Service Science Policy, Interuniversity Attraction Poles Program – Belgian Science Policy [Contract No. P5/21] is gratefully acknowledged.     

Social Connections and Incentives in the Workplace: Evidence From Personnel Data

We present evidence on the effect of social connections between workers and managers on productivity in the workplace. To evaluate whether the existence of social connections is beneficial to the firm's overall performance, we explore how the effects of social connections vary with the strength of managerial incentives and worker's ability. To do so, we combine panel data on individual worker's productivity from personnel records with a natural field experiment in which we engineered an exogenous change in managerial incentives, from fixed wages to bonuses based on the average productivity of the workers managed. We find that when managers are paid fixed wages, they favor workers to whom they are socially connected irrespective of the worker's ability, but when they are paid performance bonuses, they target their effort toward high ability workers irrespective of whether they are socially connected to them or not. Although social connections increase the performance of connected workers, we find that favoring connected workers is detrimental for the firm's overall performance.     

TEAM INCENTIVES: EVIDENCE FROM A FIRM LEVEL EXPERIMENT

Many organizations rely on teamwork, and yet field evidence on the impacts of team‐based incentives remains scarce. Compared to individual incentives, team incentives can affect productivity by changing both workers’ effort and team composition. We present evidence from a field experiment designed to evaluate the impact of rank incentives and tournaments on the productivity and composition of teams. Strengthening incentives, either through rankings or tournaments, makes workers more likely to form teams with others of similar ability instead of with their friends. Introducing rank incentives however reduces average productivity by 14%, whereas introducing a tournament increases it by 24%. Both effects are heterogeneous: rank incentives only reduce the productivity of teams at the bottom of the productivity distribution, and monetary prize tournaments only increase the productivity of teams at the top. We interpret these results through a theoretical framework that makes precise when the provision of team‐based incentives crowds out the productivity‐enhancing effect of social connections under team production.