Firm competition and incentive pay: Rent seeking at work |
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Authors: | Mikael Priks |
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Institution: | Department of Economics, Stockholm University, 106 91 Stockholm, Sweden |
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Abstract: | Empirical evidence shows that competition among firms generates steep incentives inside firms. Incentive pay stimulates productive investments but may generate inefficient rent-seeking investments. I show that competition reduces firms’ profits and thereby the inefficient investments, which makes steep incentives attractive. |
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Keywords: | J2 J3 |
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