Delegated Job Design

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Delegated Job Design

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Hvide, Hans K
Kaplan, Todd

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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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3907.

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Date of creation: Apr 2003
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Handle: RePEc:cpr:ceprdp:3907

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Find related papers by 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 and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation

This paper has been announced in the following NEP Reports:

NEP-ALL-2004-06-13 (All new papers)

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Hvide, Hans K & Kaplan, Todd, 2003. "Delegated Job Design," CEPR Discussion Papers 3907, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
A. Rashad Abdel-khalik, 2003. "Self-sorting, incentive compensation and human-capital assets," European Accounting Review, Taylor and Francis Journals, vol. 12(4), pages 661-697, January. [Downloadable!] (restricted)

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