of large companies to researchers and interest in the relation between compensation and productivity and the implications of imperfect labor markets and rent-seeking behavior for the subject. A retrospective collection of the personnel economics-literature is in Lazear et al., ed. (2004), Personnel Economics, Elgar, with 43 articles dating from 1962 to 2000 (link to contents link here). Two millennial articles by a contributor to the subject argued in the course of review and assessment to the conclusions that: [B]ecause of the relevance and newly found rigor of personnel analysis, personnel economics should and will become a more important part of the educational curriculum. The field is growing and has a large potential audience, of both students and practitioners. Gift Exchange Theory The Gift Exchange Theory, also referred to as the fair-wage theory, applies when employees are provided with better wages than they could receive at another firm, in exchange for a higher work standard. In 1993 a laboratory experiment (Fehr et al., 1993) was conducted to perceive the effects that the Gift Exchange Theory had on employee effectiveness. Contrary to predictions, it was found that most employers were offering higher (sometimes by more than 100%) than market clearing wages. On average, the higher wage was requited by a higher output, often making it very profitable for employers to offer high wage contracts. Paying for an employees performance can lead to increased productivity, and higher competition surrounding highly skilled workers who will want to work for employers who pay for performance. Tournament Theory Tournament Theory was proposed by Edward Lazear and Sherwin Rosen. The theory addresses how pay raises are associated with promotions. The theory’s main point is that promotions are a relative gain. Regarding compensation, the level of compensation must be strong enough to motivate all employees below the level of compensation who aim to be promoted. If the pay spread between promotions is larger, the incentive of employees to put in effort will also be larger. The desired outcome from this would be to see employees performing at a quality and producing a quantity of output that the organization deems desirable. Compensation is also not necessarily determined by the conception of productivity. Employees are promoted based on their relative position within the organization and not by their productivity. However, productivity does hold some weight when considering promotion. Advantages vs Disadvantages Incentive Performance: Workplaces that promote competition among employees may