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Does monitoring decrease work effort?: The complementarity between agency and crowding-out theories

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Author Info
Dickinson, David
Villeval, Marie-Claire

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Abstract

Agency theory assumes that tighter monitoring by the principal should motivate agents to increase their effort, whereas the "crowding-out" literature suggests that the opposite may occur. These two assertions are not necessarily contradictory provided that the nature of the employment relationship is taken into account [Frey, B., 1993. Does monitoring increase work effort? The rivalry between trust and loyalty. Econ. Inquiry 31, 663-670]. Results from controlled laboratory experiments show that many principals engage in costly monitoring, and most agents react to the disciplining effect of monitoring by increasing effort. However, we also find some evidence that effort is crowded out when monitoring is above a certain threshold. We identify that both interpersonal principal-agent links and concerns for the distribution of output payoff are important for the emergence of this crowding-out effect.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 63 (2008)
Issue (Month): 1 (May)
Pages: 56-76
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Handle: RePEc:eee:gamebe:v:63:y:2008:i:1:p:56-76

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eriksson, Tor & Villeval, Marie-Claire, 2008. "Performance Pay, Sorting and Social Motivation," Working Papers 07-12, University of Aarhus, Aarhus School of Business, Department of Economics. [Downloadable!]
    Other versions:
  2. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A preference-Based Lucas Critique of Public Policy," Working Papers 2009-11, University of Massachusetts Amherst, Department of Economics. [Downloadable!]
  3. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A Preference-based Lucas Critique of Public Policy," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Antoni Cunyat & Randolph Sloof, 2008. "Employee Types and Endogenous Organizational Design," Tinbergen Institute Discussion Papers 08-019/1, Tinbergen Institute. [Downloadable!]
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