TY  - JOUR
AU  - Hilt,Eric
TI  - The Negative Trade-off Between Risk and Incentives: Evidence from the American Whaling Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11960
PY  - 2006
Y2  - January 2006
UR  - http://www.nber.org/papers/w11960
L1  - http://www.nber.org/papers/w11960.pdf
N1  - Author contact info:
Eric Hilt
Wellesley College
Department of Economics
106 Central Street
Wellesley, MA 02481
Tel: 781/283-2986
Fax: 781/283-2177
E-Mail: ehilt@wellesley.edu
AB  - 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.
ER  -