The book to be used for the course is Edward P. Lazear, Personnel Economics, Cambridge, Ma: MIT Press, 1995. The book should be read in its entirety and is an introduction to the topics covered below.

You may also find it helpful to read Edward P. Lazear, Personnel Economics for Managers, New York: John Wiley and Sons, 1998, The appendices to each chapter are Ph.D. level material and the verbal discussion in the chapter should provide business applications of the course work.

Topic 1: Payment Methods

Selected Readings

Lazear, Edward P., "Salaries and Piece Rates" Journal of Business 59 (July 1986): 405-31.

Lazear, Edward P., "Performance Pay and Productivity" NBER Working Paper (Summer 1996)

Stiglitz, Joseph E. "Incentives, Risk, and Information: Notes Toward a Theory of Hierarchy," Bell Journal of Economics and Management Science 6 (August 1975): 552-79

Paarsch, Harry J. and Bruce S. Shearer."Fixed Wages, Piece Rates, and Intertemporal Productivity: A Study of Tree Planters in British Columbia," unpub. manuscript, 1996.

Baker, George. ``Incentive Contracts and Performance Measurement,'' Journal of Political Economy, June 1992, vol. 100.

Nagin, Rebitzer, Sanders, Taylor "Monitoring and Motivation in an Employment Relationship: An Analysis of a Field Experiment," unpub. manuscript, 1998.

Brown, Charles. ``Firms' Choice of Method of Pay,'' Industrial and Labor Relations Review 43 (February 1990): 165-S182-S.

Prendergast, Canice "The Provision of Incentives," forthcoming J. Econ Lit.

Fernie, Sue and David Metcalf "It's Not What You Pay It's the Way That You Pay It and That's What Gets Results" Jockeys' Pay and Performance, Centre for Econ. Performance Disc. Paper #295, LSE, 1996.

Fama, Eugene F. ``Time, Salary, and Incentive Payoffs in Labor Contracts,'' Journal of Labor Economics 9 (January 1991): 25-44.

Holmstrom, Bengt. 1979. "Moral Hazard and Observability." Bell Journal of Labor Economics 9 (January 1991): 25-44

Booth, Alison and Jeff Frank "Performance Related Pay," unpub. manuscript, University of Essex, 1997.

Topic 2: Whom to Hire? How to motivate workers when output is difficult to observe.

Selected Readings:

Lazear, Edward P., and Sherwin Rosen, "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy 89(5) (October 1981): 841-64; reprinted in Labor Economics/The International Library of Critical Writings in Economics 47, Vol. II, eds. Orley C.Ashenfelter and Kevin F. Hallock (Aldershot, England: Edward Elgar Publishing Ltd., 1995): 422-45.

Carmichael, H. Lorne. January 1983. "The Agent-Agnets Problem: Payment by Relative Output," Journal of Economics 1:50-65.

Lazear, Edward P., "Pay Equality and Industrial Politics," Journal of Political Economy 97(3) (June 1989): 561-80.

Rosen, Sherwin. "Prizes and Incentives in Elimination Tournaments," American Economic Review 83(4), p:757-770

Drago, Robert and Gerald Garvey "Incentives for Helping on the Job: Theory and Evidence." Journal of Labor Economics, 16,1, January, 1998.

Knoeber, Charles R., and Walter N. Thurman. 1994 "Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production, Journal of Labor Economics 12:155 79.

Chan, William "External Recruitment vs. Internal Promotion," Journal of Labor Economics, 14,4, October, 1996.

Hendricks, Wallace and Michael Gibbs, "Are Administrative Pay Systems a Veil?" unpub. manuscript, University of Illinois, 1997.

Topic 3: Life cycle incentives, teams, task assignments, buyouts and downsizing

Selected Readings:

Lazear, Edward P. "Globalization and the Market for Teammates," Economic Journal, 1999.

Hutchens, Robert M. 1987. "A Test of Lazear's Theory of Delayed Payment Contract." Journal of Labor Economics 5S150-S170.

Harris, Milton, and Hölmstrom, Bengt. ``A Theory of Wage Dynamics,'' Review of Economic Studies 49 (July 1982): 315-33.

Lazear, Edward P., and Eugene Kandel, "Peer Pressure and Partnerships," Journal of Political Economy 100(4) (August 1992): 801-17.

MacDonald, Glenn and Leslie Marx "Adverse Specialization."

Lazear, Edward. "Job Security Provisions and Employment," Quarterly Journal of Economics 105(3) (August 1990): 699-726.

Hall, Robert E. and Edward P. Lazear "The Excess Sensitivity of Layoffs and Quits to Demand," with Robert Hall, Journal of Labor Economics 2 (2: Essays in Honor of Melvin W. Reder) (April 1984): 233-57

Brent Boning and Kathryn Shaw: "The Effectiveness of Problem-Solving Teams & Incentive Pay: Evidence from Steel" presented at SOLE conference, San Francisco, May 1998. unpub. manuscript, Carnegie Mellon University, 1998.

Brent Boning and Kathryn Shaw: The Effectiveness of Problem-Solving Teams & Incentive Pay: Evidence from Steel"

Topic 4: Raiding, Monetary Equivalence, Benefits, Stock and Options, Job Assignment

Selected Readings:

Rosen, Sherwin. ``Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition,'' Journal of Political Economy 82 (January/February 1974): 34-55.

Lazear, Edward "Raids and Offer Matching," Research in Labor Economics, Vol. 8, Part A, ed. Ronald G. Ehrenberg (Greenwich, CT: JAI Press, 1986): 141-65.

Prendergast, Candice. Sept. 1993. "A Theory of 'Yes Men'." American Economic Review 83(4), p: 757-70 Lazear, Edward "Pensions as Severance Pay," in Financial Aspects of the U.S. Pension System, ed. Zvi Bodie, John Soven, and David A. Wise. Chicago: University of Chicago Press, 1986.

Lazear, Personnel Economics for Managers pp 340-42 and Ch 14.

Lazear, Edward and Sherwin Rosen "Male-Female Wage Differentials in Job Ladders," Journal of Labor Economics 8(1)(Part 2: Essays in Honor of Albert Rees) (January 1990): S106-S123.

Lazear, Edward "The Job as a Concept," in Performance Measurement, Evaluation, and Incentives, ed. William J. Bruns, Jr. (Boston: Harvard Business School Press, 1992): 183-215.

Baker, George, Michael Gibbs and Bengt Holmstrom. 1994. "The Internal Economics of the Firm: Evidence from Personnel Data." Quarterly Journal of Economics 109:881-919.

Topic 5: Authority, Hierarchy and Worker Empowerment, Extensions; Summary

Selected Readings:

Rosen, Sherwin. ``Authority, Control, and the Distribution of Earnings,'' Bell Journal of Economics 13 (October 1982): 311-23.

Sah, Raaj, and Stiglitz, Joseph E., "The Architecture of Economic Systems: Hierarchies and Polyarchies," American Economic Review 76 (September 1986):716-27

Freeman, Richard B., and Edward P. Lazear "An Economic Analysis of Works Councils," with Richard B. Freeman. in Works Councils: Consultation, Representation, and Cooperation in Industrial Relations [NBER conference volume], ed. Joel Rogers and Wolfgang Streeck, University of Chicago Press for the NBER, November 1995.

Lazear, Edward P. "Culture and Language," Journal of Political Economy, December, 1999

Lazear, E. "Personnel Economics: Past Lessons and Future Directions" Presidential Address to Society of Labor Economists, 1998.