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The Relationship Between Delegation and Incentives Across Occupations: Evidence and Theory

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  • DeVaro, Jed
  • Prasad, Suraj
Abstract
A large literature, both theoretical and empirical, suggests that delegation of authority and incentives should have a positive relationship. Using data from a large cross section of British establishments, we show that the positive relationship between incentives and delegation that has been consistently documented in the empirical literature masks a stark difference between job types. We classify jobs into two categories: complex jobs include professional, technical and scientific occupations and simple jobs consist of all other occupations with a lower-level code in the Standard Occupational Classification (SOC) system. We find that for simple jobs, the relationship between delegation and incentives is positive as has been found in the previous literature, whereas for complex jobs it is negative. To explain this negative relationship for complex jobs, we develop a model where tasks have a risk-return tradeoff and where a single performance measure has to induce both task selection and effort. We find that if tasks vary sufficiently by risk and return and if effort is noisy to measure, then delegation and incentives have a negative relationship.

Suggested Citation

  • DeVaro, Jed & Prasad, Suraj, 2013. "The Relationship Between Delegation and Incentives Across Occupations: Evidence and Theory," Working Papers 2013-05, University of Sydney, School of Economics.
    • Handle: RePEc:syd:wpaper:2123/9015
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    References listed on IDEAS

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    Cited by:

    1. Schöttner, Anja & Rohlfing-Bastian, Anna, 2015. "Optimal Allocation of Decision-Making Authority and the Provision of Incentives under Uncertainty," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113200, Verein für Socialpolitik / German Economic Association.
    2. Elisa Gerten & Michael Beckmann & Elisa Gerten & Matthias Kräkel, 2022. "Information and Communication Technology, Hierarchy, and Job Design," ECONtribute Discussion Papers Series 189, University of Bonn and University of Cologne, Germany.
    3. Marco Faillo & Costanza Piovanelli, 2017. "Wage delegation and intrinsic motivation: an experimental study," CEEL Working Papers 1701, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    4. Emre Ekinci & Nikolaos Theodoropoulos, 2021. "Determinants of Delegation: Evidence from British Establishment Data," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 35(1), pages 50-67.
    5. Alberto Bayo-Moriones & Jose E. Galdon-Sanchez & Sara Martinez-de-Morentin, 2017. "Performance Measurement and Incentive Intensity," Journal of Labor Research, Springer, vol. 38(4), pages 496-546, December.
    6. Christos Bilanakos & John S. Heywood & John Sessions & Nikolaos Theodoropoulos, 2016. "Delegation and worker training," University of Cyprus Working Papers in Economics 06-2016, University of Cyprus Department of Economics.
    7. Ekinci, Emre & Theodoropoulos, Nikolaos, 2021. "Disagreement and informal delegation in organizations," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    8. Emre Ekinci & Nikos Theodoropoulos, 2018. "Informal Delegation and Training," University of Cyprus Working Papers in Economics 02-2018, University of Cyprus Department of Economics.
    9. Jed DeVaro & Antti Kauhanen, 2016. "An “Opposing Responses” Test of Classic versus Market-Based Promotion Tournaments," Journal of Labor Economics, University of Chicago Press, vol. 34(3), pages 747-779.
    10. Christos Bilanakos & John S. Heywood & John G. Sessions & Nikolaos Theodoropoulos, 2018. "Does Delegation Increase Worker Training?," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1089-1115, April.

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