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Discretion, Productivity, and Work Satisfaction

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  • Björn Bartling
  • Ernst Fehr
  • Klaus M. Schmidt

Abstract

In Bartling, Fehr, and Schmidt (2012) we show theoretically and experimentally that it is optimal to grant discretion to workers if (i) discretion increases productivity, (ii) workers can be screened by past performance, (iii) some workers reciprocate high wages with high effort, and (iv) employers pay high wages leaving rents to their workers. In this paper we show experimentally that the productivity increase due to discretion is not only sufficient but also necessary for the optimality of granting discretion to workers. Furthermore, we report representative survey evidence on the effect of discretion on workers' welfare, confirming that workers earn rents.

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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 169 (2013)
Issue (Month): 1 (March)
Pages: 4-22

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201303)169:1_4:dpaws_2.0.tx_2-8

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  1. Morris M. Kleiner & Richard B. Freeman, 2000. "Who Benefits Most from Employee Involvement: Firms or Workers?," American Economic Review, American Economic Association, vol. 90(2), pages 219-223, May.
  2. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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Cited by:
  1. Lea Cassar, 2014. "Optimal contracting with endogenous project mission," ECON - Working Papers 150, Department of Economics - University of Zurich.

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