|This centre is a member of The LSE Research Laboratory [RLAB]: CASE | CEE | CEP | SERC | STICERD||Cookies?|
Paper No' EOPP 030: | Full paper
Save Reference as: BibTeX File | EndNote Import File
Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: Economic Organisation and Public Policy
Share this page: Google Bookmarks | Facebook | Twitter
Abstract:We explore the consequence for taxation and regulation of bonus pay when investors are protected by taxpayers from downside risk. The paper develops a model where workers in financial sector firms make decisions about effort and risktaking which are influenced by the structure of bonus pay. Bailouts lead to too little effort, too much risk-taking and increase inequality. We show that the optimal structure of bonuses can be implemented by a combination of a regulation on the structure of bonuses and a tax on their level.
Copyright © RLAB & LSE 2003 - 2015 | LSE, Houghton Street, London WC2A 2AE | Contact: RLAB | Site updated 25 January 2015