The Relationship between Delegation and Incentives Across Occupations: Evidence and Theory

A large literature suggests that incentive pay and delegation of worker authority are positively related. Using data from a large cross section of B ritish establishments, we show that the positive relationship found in the empirical literature masks a stark difference across jobs. Classifying jobs into two categories ( complex jobs, including professional, technical and scientific occupations, and simple jobs, consisting of all other non‐managerial occupations) we find a positive relationship for simple jobs and a negative relationship for complex jobs. To explain this negative relationship, we develop a model where stronger incentives distort a worker's decisions towards low risk‐return tasks.