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Crowding Effects and Work Ethics

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  • Sverre Grepperud
  • Pål Andreas Pedersen

Abstract

. This paper analyses optimal contracts in a principal–agent model where the agent is intrinsically motivated, and there is an endogenous relationship between the structure of incentive payments and intrinsic motivation (crowding effects). The analysis shows that crowding effects have implications for the optimal contract, and that, under some conditions, the principal can make better achievements without implementing any economic incentives. Furthermore, it is shown that when high‐powered incentives reduce intrinsic motivation (crowding‐out), the first‐best solution in a principal–agent framework is unattainable.

Suggested Citation

  • Sverre Grepperud & Pål Andreas Pedersen, 2006. "Crowding Effects and Work Ethics," LABOUR, CEIS, vol. 20(1), pages 125-138, March.
    • Handle: RePEc:bla:labour:v:20:y:2006:i:1:p:125-138
    DOI: 10.1111/j.1467-9914.2006.00315.x
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    Cited by:

    1. Kirti Srivastava & R. Krishna Kumar & M. Swapna & V. Swaroopa Rani & V. Dimri, 2012. "Inundation studies for Nagapattinam region on the east coast of India due to tsunamigenic earthquakes from the Andaman region," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 63(1), pages 211-221, August.
    2. Alexandros Gabrielsen & Axel Kirchner & Zhuoshi Liu & Paolo Zagaglia, 2015. "Forecasting Value-At-Risk With Time-Varying Variance, Skewness And Kurtosis In An Exponential Weighted Moving Average Framework," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 1-29.
    3. Heidi Olander & Pia Hurmelinna-Laukkanen & Jukka Mähönen, 2009. "WHAT'S SMALL SIZE GOT TO DO WITH IT? PROTECTION OF INTELLECTUAL ASSETS IN SMEs," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 13(03), pages 349-370.
    4. Damiano Fiorillo, 2011. "Do Monetary Rewards Crowd Out The Intrinsic Motivation Of Volunteers? Some Empirical Evidence For Italian Volunteers," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 82(2), pages 139-165, June.
    5. Bergland, Harald & Pedersen, Pål Andreas, 2019. "Efficiency and traffic safety with pay for performance in road transportation," Transportation Research Part B: Methodological, Elsevier, vol. 130(C), pages 21-35.

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