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Delegated Job Design

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Listed:
  • Hvide, Hans K.
  • Kaplan, Todd

Abstract

Why do firms delegate job design decisions to workers, and what are the implications of such delegation? We develop a private-information based theory of delegation, where delegation enables high-ability workers to signal their ability by choosing difficult tasks. Such signalling provides a more efficient allocation of talent inside the firm, but at the cost that low-ability workers must be compensated to be willing to self-sort. Career concerns put a limit to the efficiency of delegation: when market observability of job content is high, the compensation needed to get low ability workers to self-sort is high, and firms limit delegation to avoid cream-skimming of the high-ability workers. We investigate implications of the theory for how misallocation of talent within firms may occur and to the design optimal incentive contracts.

Suggested Citation

  • Hvide, Hans K. & Kaplan, Todd, 2003. "Delegated Job Design," CEPR Discussion Papers 3907, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3907
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    References listed on IDEAS

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    Cited by:

    1. Maria De Paola & Vincenzo Scoppa, 2007. "Delegation, Skill Acquisition and Turnover Costs," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(1), pages 111-133.
    2. A. Rashad Abdel-khalik, 2003. "Self-sorting, incentive compensation and human-capital assets," European Accounting Review, Taylor & Francis Journals, vol. 12(4), pages 661-697.

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    More about this item

    Keywords

    Career concerns; Delegation; Discretion; Peter principle; Sun hydraulics;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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