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Division of Labour and Directed Production

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Author Info
Marisa Ratto () (University of Bristol, Centre for Market and Public Organisations (CMPO))
Wendelin Schnedler () (University of Heidelberg, Department of Economics)

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Abstract

We examine a situation where efforts on different tasks positively affect production but are not separately verifiable and where the manager (principal) and the worker (agent) have different ideas about how production should be carried out: agents prefer a less efficient way of production. We show that by dividing labour (assigning tasks to different agents and verifying that agents do not carry out tasks to which they are not assigned), it is possible for the principal to implement the efficient way of production. Colluding agents can undermine this implementation. However, if agents have different abilities, collusion can be prevented by a specific assignment of agents to tasks.

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File URL: http://www.awi.uni-heidelberg.de/with2/Discussion%20papers/papers_2003_2005/dp421.pdf
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Publisher Info
Paper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0421.

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Length: 23 pages
Date of creation: Jul 2005
Date of revision: Jul 2005
Handle: RePEc:awi:wpaper:0421

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Related research
Keywords: hidden action moral hazard specialisation job design

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Find related papers by JEL classification:
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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References listed on IDEAS
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    Other versions:
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    Other versions:
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    Other versions:
  9. Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," The Centre for Market and Public Organisation 03/071, Department of Economics, University of Bristol, UK. [Downloadable!]
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  13. Canice Prendergast, 2003. "The Limits of Bureaucratic Efficiency," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 929-958, October. [Downloadable!] (restricted)
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  15. repec:rus:hseeco:124059 is not listed on IDEAS
  16. Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 19(2), pages 285-300, Summer.
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