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Incentive Contracts And Time Use, Tor Eriksson, Jaime Ortega

Jaime Ortega

Empirical studies on incentive contracts have primarily been concerned with the effects on employees' productivity and earnings. The productivity increases associated with such contracts may, however, come at the expense of quality of life at or outside work. In this paper we study the effect on the employees' non-work activities, testing whether incentive contracts lead to a change in the allocation of time across work and non-work activities. In doing so, we distinguish between two effects, a substitution effect and a discretion effect. On the one hand, the introduction of explicit incentives raises the marginal payoff to work, hence employees …