We present evidence on whether workers have social preferences by comparing workers ’ productivity under relative incentives, where individual effort imposes a negative externality on others, to their productivity under piece rates, where it does not. We find that the productivity of the average worker is at least 50 percent higher under piece rates than under relative incentives. We show that this is due to workers partially internalizing the negative externality their effort imposes on others under relative incentives, especially when working alongside their friends. Under piece rates, the relationship among workers does not affect productivity. Further analysis reveals that workers internalize the externality only when they can monitor others and be monitored. This rules out pure altruism as the underlying motive of workers ’ behavior. We have benefited from discussions with Heski Bar-Isaac, V. Bhaskar, Timothy Besley, Marianne Bertrand,

We analyze a unique data set detailing the financial activities of a drug-selling street gang on a monthly basis over a four-year period in the recent past. The data, originally compiled by the gang leader to aid in managing the organization, contain detailed information on both the sources of revenues (e.g. drug sales, extortion) and expenditures (e.g costs of drugs sold, weapons, tribute to the central gang organization, wages paid to various levels of the gang). Street-level drug dealing appears to be less lucrative than is generally thought. We estimate the average wage in the organization to rise from roughly $6 per hour to $11 per hour over the time period studied. The distribution of wages, however, is extremely skewed. Gang leaders earn far more than they could in the legitimate sector, but the actual street-level dealers appear to earn less than the minimum wage throughout most of our sample, in spite of the substantial risks associated with such activities (the annual violent death rate in our sample is 0.07). There is some evidence consistent both with compensating differentials and efficiency wages. The markup on drugs suggests that the gang has substantial local market power. Gang wars appear to have an important strategic component: violence on another gang’s turf shifts demand away from that area. The gang we observe responds to such attacks by pricing below marginal cost, suggesting

We study a contest with multiple (not necessarily equal) prizes. Contestants have private information about an ability parameter that affects their costs of bidding. The contestant with the highest bid wins the first prize, the contestant with the second-highest bid wins the second prize, and so on until all the prizes are allocated. All contestants incur their respective costs of bidding. The contest’s designer maximizes the expected sum of bids. Our main results are: 1) We display bidding equlibria for any number of contestants having linear, convex or concave cost functions, and for any distribution of abilities. 2) If the cost functions are linear or concave, then, no matter what the distribution of abilities is, it is optimal for the designer to allocate the entire prize sum to a single ”first” prize. 3) We give a necessary and sufficient conditions ensuring that several prizes are optimal if contestants have a convex cost function.

This paper examines the relation between the premium on closed-end funds and organizational features of the funds and advisors, including the compensation scheme of the investment advisor. We find that the fund premium is larger when: (a) the advisor's compensation is more sensitive to fund performance; (b) the assets managed by the advisor are concentrated in the fund in question; (c) the advisor manages other funds with low compensation sensitivity to performance and with low concentration of assets managed by the advisor; and (d) the advisor 's compensation contract evaluates performance relative to a benchmark. 1 The growth in assets under management by investment companies has motivated both theoretical and empirical interest in the contractual relationship between portfolio managers and their clients. 1 This paper considers how the interaction between organization structure, managerial incentives, and managerial behavior determines pricing of shares of closed-end funds. In p...

In the run-up to elections in a large Indian city, residents in a random sample of slums received newspapers containing report cards on politicians. The report card for a jurisdiction presented information, obtained under India’s disclosure laws, on performance of the incumbent legislator and qualifications of the incumbent and two main challengers. Relative to the control slums, treatment slums saw higher turnout, reduced vote buying and higher voteshare for better performing and relatively more qualified incumbents. Moreover, voters demonstrated sophistication in how they use report card information to judge performance and qualifications – they used their knowledge on incidence of public good spending in slums to evaluate jurisdiction-level information on public good spending by the incumbent and used challenger qualifications as a yardstick to judge incumbent qualifications. The authors are from MIT (Banerjee), Carnegie Mellon University (Kumar) and Harvard University (Pande). We thank our partners Satark Nagrik Sangathan, Delhi NGO Network and Hindustan and especially Anjali

valuable comments. Special thanks to Lars Vilhuber for his help in accessing the GSOEP data. Financial

Whom to hire, promote, admit into elite universities, elect, or issue government contracts to are all determined in a tournament-like (winner-take-all) structure. This paper constructs a simple model of pair-wise tournament competition to investigate affirmative action in these markets. We consider two forms of affirmative action: group-sighted, where employers are allowed to use group identity in pursuit of their diversity goals; and group-blind, where they are not. It is shown that the equilibrium group-sighted affirmative action scheme involves a constant handicap given to agents in the disadvantaged group. Equilibrium group-blind affirmative action creates a unique semi-separating equilibrium in which a large pool of contestants exerts zero effort, and this pool is increasing in the aggresiveness of the affirmative action mandate. We are grateful to Edward Glaeser, Jerry Green, and Bart Lipman for helpful comments and suggestions.

Abstract: This article examines the effects of competitive crowding on social action. Our contributions are twofold. First, we clarify a structural determinant of conduct in a sharply defined hierarchy. Although empirical studies in different areas of sociology have demonstrated the multifaceted consequences of crowding around social positions, much of the existing work has addressed lateral rather than hierarchical differentiation. Here, we specify the unique effect of crowding by those positioned behind a focal actor in a hierarchical ordering, net of the opportunity to surpass others located above that actor. Our results show that crowding matters more than opportunity. Second, we document a contingent effect of crowding as a function of the time it takes for the hierarchy in which actors are embedded to stabilize. We posit that hierarchies exert sway only after their constitutive elements lock into place and appear reasonably stable among those competing for positions within them. The empirical context we examine is the National Association for Stock Car Auto Racing (NASCAR). Using panel data on NASCAR’s Winston Cup Series, we model the probability that a driver will crash his car in a given race. We find that (a) drivers crash with greater frequency when their

We formulate an empirical model of promotion with dynamic selfselection where the current promotion probability depends on the initial level in the firm, individual specific attributes (age, schooling and tenure), unobserved (to the econometrician) individual attributes, time varying firm specific variables(firm size and profits)aswellasendogenouspast promotion histories. We distinguish the effects of recent past promotion outcomes (short run dynamics) from the effects of promotion speed which is measured as the average number of promotion transitions achieved per year of potential experience (long run dynamics). The model is fit onan 8 year panel of promotion histories of 30,000 American executives employed in more than 380 different firms. We find that individual specific endowments (age, tenure and schooling) account for a larger share of individual variations in promotion histories than do variations in firm size (employment) and profits, although the difference in explanatory power may be relatively small. While schooling raises promotion opportunities, its effect decreases with time. We find that workers are non-randomly matched across firms and, in particular, that those who have higher unobserved abilities and motivation are matched with more profitable firms. Recent promotions seem to reduce promotion opportunities within a short period (especially up to 2 years) but, unlike what is sometimes postulated in the theoretical literature, we find no evidence of “fast track ” promotion We thank Edward Lazear, Bart Hamilton and Thierry Magnac, for helpful discussions at

We formulate an empirical model of promotion with dynamic selfselection where the current promotion probability depends on the hierarchical level in the firm, individual human capital, unobserved (to the econometrician) individual specific attributes, time varying firm specific variables(firm size and profits) as well as endogenous past promotion histories. We examine the causal effect of previous promotion histories (as measured by realized speed of promotion) on future promotion outcomes. The model is fit onan8yearpanelofpromotion histories of 30,000 American executives employed in more than 380 different firms. The stochastic process generating promotions is ∗We thank Edward Lazear, Bart Hamilton and Thierry Magnac, for helpful discussions at an early stage of this project. We also thank Jean-Marc Robin, Guy Laroque and Francis Kramarz for useful comments and suggestions. The support of Cirano, IZA and a Temple University Research leave are gratefully acknowledged by Bognanno. The usual