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Workplace surveillance, privacy protection, and efficiency wages

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  • Schmitz, Patrick W.

Abstract

Consider an employer who wants her employee to work hard. As is well known from the e.ciency wage literature, the employer must pay the (wealth-constrained) employee a positive rent to provide incentives for exerting unobservable e.ort. Alternatively, the employer could make effort observable by costly workplace surveillance. It is argued that a privacy protection law preventing surveillance may increase the total surplus. While such a law reduces the employer’s profit, this loss can be overcompensated by the employee’s gain, because the employer invests in surveillance not only to implement higher effort, but also to reduce the employee’s rent.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 12 (2005)
Issue (Month): 6 (December)
Pages: 727-738

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Handle: RePEc:eee:labeco:v:12:y:2005:i:6:p:727-738

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References

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  2. Yeon-Koo Che & Seung-Weon Yoo, 2001. "Optimal Incentives for Teams," American Economic Review, American Economic Association, vol. 91(3), pages 525-541, June.
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  4. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, October.
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  6. Dominique Demougin & Claude Fluet, 1996. "Mechanism Sufficient Statistic in the Risk-Neutral Agency Problem," Cahiers de recherche du Département des sciences économiques, UQAM 9602, Université du Québec à Montréal, Département des sciences économiques.
  7. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  8. Schmitz, Patrick W., 2005. "Allocating Control in Agency Problems with Limited Liability and Sequential Hidden Actions," CEPR Discussion Papers 5145, C.E.P.R. Discussion Papers.
  9. Pitchford, Rohan, 1998. "Moral hazard and limited liability: The real effects of contract bargaining," Economics Letters, Elsevier, vol. 61(2), pages 251-259, November.
  10. MacLeod, W Bentley & Malcomson, James M, 1989. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Econometrica, Econometric Society, vol. 57(2), pages 447-80, March.
  11. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  12. Oz, Effy & Glass, Richard & Behling, Robert, 1999. "Electronic workplace monitoring: What employees think," Omega, Elsevier, vol. 27(2), pages 167-177, April.
  13. Anthony M. Townsend & James T. Bennett, 2003. "Privacy, Technology, and Conflict: Emerging Issues and Action in Workplace Privacy," Journal of Labor Research, Transaction Publishers, vol. 24(2), pages 195-205, April.
  14. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
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Cited by:
  1. Matthias Krakel, 2006. "Tournaments versus Piece Rates under Limited Liability," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 5(3), pages 185-199, December.
  2. Kräkel, Matthias & Schöttner, Anja, 2008. "Relative Performance Pay, Bonuses, and Job-Promotion Tournaments," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 245, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Matthias Kräkel, 2010. "Double-Sided Moral Hazard, Efficiency Wages, and Litigation," Journal of Law, Economics and Organization, Oxford University Press, vol. 26(2), pages 337-364.
  4. Kräkel, Matthias & Schöttner, Anja, 2009. "Minimum Wages and Excessive Effort Supply," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 264, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  5. Li Sanxi & Yao Dongmin & Xiao Hao, 2013. "Contract Bargaining with a Risk-Averse Agent," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 285-301, November.
  6. Imhof, Lorens & Kräkel, Matthias, 2014. "Bonus pools and the informativeness principle," European Economic Review, Elsevier, vol. 66(C), pages 180-191.
  7. Kräkel, Matthias & Schöttner, Anja, 2012. "Internal labor markets and worker rents," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 491-509.

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