The Negative Trade-off Between Risk and Incentives: Evidence from the American Whaling Industry / Eric Hilt.

Format:

Book

Author/Creator:

Hilt, Eric.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11960.

NBER working paper series no. w11960

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Negative Trade-off Between Risk and Incentives

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

This paper analyzes the trade-off between risk and incentives in the share contracts of the American whaling industry. Using a newly-collected panel of 5,378 individuals who sailed on whaling voyages from 1855-68, the response of sailors' compensation to an increase in risk is estimated. The risks used to identify this response resulted from the commerce-raiding naval vessels of the Confederacy during the Civil War. As the Confederate cruisers sailed primarily in the Atlantic, and therefore posed far less of a threat to whaling voyages to other oceans, a quasi-experimental approach, focussing on the differences between Atlantic voyages compared to others, is implemented. The results support the existence of a negative trade-off between risk and incentives in the industry's contracts. Moreover, evidence is found of selection among less risk-averse sailors and merchants into riskier voyages during the war.

Notes:

Print version record

January 2006.