Publication Date
1992
Recommended Citation
Levy, Amnon, Efficiency and equity considerations in allocating remunerations under uncertainty: the case of Australian universities, Department of Economics, University of Wollongong, Working Paper 92-9, 1992, 10.
https://ro.uow.edu.au/commwkpapers/300
Abstract
By considering the heterogeneity of the labour force, uncertainty about performances, and risk and inequality aversion, and by applying a skill-wise optimal-control method, an efficient rule for allocating salary loadings in a regulated place of employment is derived. This rule indicates that salary loadings may vary monotonically, but not necessarily increase, with skill. Only when the marginal costs of risk-bearing and inequality are smaller than the expected marginal performance, loadings should monotonically increase with skill.