Social Norms and Moral Hazard
AbstractWe examine the impact of social rewards in an unemployment insurance context. A social norm requires effort in proportion to perceived talent, but individuals cunningly choose effort so as to manipulate the perception of their talent. The model predicts that low talented individuals increase effort in response to more generous unemployment insurance. The welfare consequences of the social rewards are ambiguous. Social rewards boost effort, but for individuals with low talent more than any real economic concern can justify. Moreover, the distribution of social respect is slanted in favour of the more talented.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 111 (2001)
Issue (Month): 473 (July)
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Other versions of this item:
- A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- I - Health, Education, and Welfare
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