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Bidimensional screening with intrinsically motivated workers

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  • F. Barigozzi
  • N. Burani

Abstract

We study the screening problem of a firm that needs to hire a worker to produce output and that observes neither the productive ability nor the intrinsic motivation of the job applicant. We completely characterize the set of optimal contracts according to whether motivation or ability is the main determinant of the worker’s performance. We show that it is always in the firm’s interest to hire all types of worker and to offer different contracts to different types of employees. Interestingly, when motivation is very high, incentives force the firm to pay higher informational rents, to increase effort distorsions for motivated workers, and to offer a strictly positive wage to workers enjoying a positive utility from effort provision, who thus become paid volunteers. These results suggest that, from the principal’s viewpoint, very high motivation might not be a desirable worker’s characteristic.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp866.

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Date of creation: Feb 2013
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Handle: RePEc:bol:bodewp:wp866

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  1. Delfgaauw, Josse & Dur, Robert, 2010. "Managerial Talent, Motivation, and Self-Selection into Public Management," IZA Discussion Papers 4766, Institute for the Study of Labor (IZA).
  2. Heyes, Anthony, 2005. "The economics of vocation or 'why is a badly paid nurse a good nurse'?," Journal of Health Economics, Elsevier, Elsevier, vol. 24(3), pages 561-569, May.
  3. Basov, Suren, 2001. "Hamiltonian approach to multi-dimensional screening," Journal of Mathematical Economics, Elsevier, vol. 36(1), pages 77-94, September.
  4. Josse Delfgaauw & Robert Dur, 2004. "Incentives and Workers' Motivation in the Public Sector," Tinbergen Institute Discussion Papers, Tinbergen Institute 04-060/1, Tinbergen Institute.
  5. Josse Delfgaauw & Robert Dur, 2003. "From Public Monopsony to Competitive Market: More Efficiency but Higher Prices," CESifo Working Paper Series 1095, CESifo Group Munich.
  6. Armstrong, Mark & Rochet, Jean-Charles, 1999. "Multi-dimensional screening:: A user's guide," European Economic Review, Elsevier, Elsevier, vol. 43(4-6), pages 959-979, April.
  7. Delfgaauw, Josse & Dur, Robert, 2007. "Signaling and screening of workers' motivation," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 62(4), pages 605-624, April.
  8. Armstrong, Mark, 1999. "Optimal Regulation with Unknown Demand and Cost Functions," Journal of Economic Theory, Elsevier, Elsevier, vol. 84(2), pages 196-215, February.
  9. Canice Prendergast, 2008. "Intrinsic Motivation and Incentives," American Economic Review, American Economic Association, American Economic Association, vol. 98(2), pages 201-05, May.
  10. Goux, Dominique & Maurin, Eric, 1999. "Persistence of Interindustry Wage Differentials: A Reexamination Using Matched Worker-Firm Panel Data," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(3), pages 492-533, July.
  11. Canice Prendergast, 2007. "The Motivation and Bias of Bureaucrats," American Economic Review, American Economic Association, American Economic Association, vol. 97(1), pages 180-196, March.
  12. Kevin Murdock, 2002. "Intrinsic Motivation and Optimal Incentive Contracts," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 650-671, Winter.
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  14. Francois, Patrick, 2000. "'Public service motivation' as an argument for government provision," Journal of Public Economics, Elsevier, Elsevier, vol. 78(3), pages 275-299, November.
  15. Francesca Barigozzi & Gilberto Turati, 2012. "Human health care and selection effects. Understanding labor supply in the market for nursing1," Health Economics, John Wiley & Sons, Ltd., vol. 21(4), pages 477-483, 04.
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Cited by:
  1. F. Barigozzi & N. Burani & D. Raggi, 2013. "The Lemons Problem in a Labor Market with Intrinsic Motivation. When Higher Salaries Pay Worse Workers," Working Papers wp883, Dipartimento Scienze Economiche, Universita' di Bologna.

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