Intrinsic Motivation in the Labor Market: Not Too Much, Thank You
AbstractWe study the screening problem of a firm that needs to hire a worker to produce output and that can not observe either the productive ability or the intrinsic motivation of the worker applying for the job. We completely characterize the set of optimal contracts and we show that it is always in the firm’s interest to hire all types of worker, even the worst ones, and to offer different contracts to different types of employees. Interestingly, the smallest distortions arise when motivation is high but not as much as to become more significant than productive ability. Moreover, when motivation is very high, incentives force the firm to offer a strictly positive wage to workers who derive a positive utility from effort exertion and who become paid volunteers. These results prove that very high motivation is not a desirable workers’ characteristic.
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Bibliographic InfoPaper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp866.
Date of creation: Feb 2013
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Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- M55 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Contracting Devices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-08 (All new papers)
- NEP-CTA-2013-02-08 (Contract Theory & Applications)
- NEP-HRM-2013-02-08 (Human Capital & Human Resource Management)
- NEP-MIC-2013-02-08 (Microeconomics)
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