Making A Difference
AbstractDespite the potential for free-riding, workers motivated by ‘making a difference’ to the mission or output of an establishment may donate labour to it. When the establishment uses performance related compensation (PRC), these labour donations closely resemble a standard private provision of public goods problem, and are not rational in large labour pools. Without PRC, however, the problem differs significantly from a standard private provision of public goods situation. Specifically, in equilibrium: there need not be free-riding, decisions are non-monotonic in valuations, and contribution incentives are significant even in large populations. When PRC is not used, the establishment tends to favour setting low wages which help to select a labour force driven by concern for the firm’s output. Expected output can actually fall with the wage in this situation. For sufficiently high levels of risk aversion, performance related pay can yield less expected output than when compensation is output independent.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5158.
Date of creation: Jul 2005
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
- J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-13 (All new papers)
- NEP-EVO-2005-08-13 (Evolutionary Economics)
- NEP-LAB-2005-08-13 (Labour Economics)
- NEP-PBE-2005-08-13 (Public Economics)
- NEP-SOC-2005-08-13 (Social Norms & Social Capital)
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.:
- Christopher Ruhm & Carey Borkoski, 2000.
"Compensation in the Nonprofit Sector,"
NBER Working Papers
7562, National Bureau of Economic Research, Inc.
- Jed DeVaro & Dana Samuelson, 2005. "Why Are Promotions Less Likely in Nonprofit Firms?," Labor and Demography 0501010, EconWPA.
- Malcomson, J., 1998.
"Individual employment contracts,"
Discussion Paper Series In Economics And Econometrics
9804, Economics Division, School of Social Sciences, University of Southampton.
- 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.
- Paul A. Grout & Michelle J. Yong, 2003. "The Role of Donated Labour and Not for Profit at the Public/Private Interface," The Centre for Market and Public Organisation 03/074, Department of Economics, University of Bristol, UK.
- A. G. Holtmann & Todd L. Idson, 1993. "Wage Determination of Registered Nurses in Proprietary and Nonprofit Nursing Homes," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 55-79.
- Roomkin, Myron J & Weisbrod, Burton A, 1999. "Managerial Compensation and Incentives in For-Profit and Nonprofit Hospitals," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 750-81, October.
- Patrick Francois, 2003.
"Not-For-Profit Provision of Public Services,"
Royal Economic Society, vol. 113(486), pages C53-C61, March.
- Engers, Maxim & Gans, Joshua S, 1998. "Why Referees Are Not Paid (Enough)," American Economic Review, American Economic Association, vol. 88(5), pages 1341-49, December.
- Vicary, Simon, 2000. "Donations to a public good in a large economy," European Economic Review, Elsevier, vol. 44(3), pages 609-618, March.
- Goddeeris, John H, 1988. "Compensating Differentials and Self-selection: An Application to Lawyers," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 411-28, April.
- Lewis M. Segal & Burton A. Weisbrod, 2002. "Volunteer labor sorting across industries," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(3), pages 427-447.
- Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
- Menchik, Paul L. & Weisbrod, Burton A., 1987. "Volunteer labor supply," Journal of Public Economics, Elsevier, vol. 32(2), pages 159-183, March.
- Giacomo Corneo & Rafael Rob, .
"Working in Public and Private Firms,"
Penn CARESS Working Papers
7942b6b570793de0891a05acb, Penn Economics Department.
- Canice Prendergast, 2003. "The Limits of Bureaucratic Efficiency," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 929-958, October.
- Duncan, Brian, 1999. "Modeling charitable contributions of time and money," Journal of Public Economics, Elsevier, vol. 72(2), pages 213-242, May.
- Carol Propper & Deborah Wilson, 2003.
"The Use and Usefulness of Performance Measures in the Public Sector,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 19(2), pages 250-267, Summer.
- Carol Propper & Deborah Wilson, 2003. "The Use and Usefulness of Performance Measures in the Public Sector," The Centre for Market and Public Organisation 03/073, Department of Economics, University of Bristol, UK.
- repec:rus:hseeco:124059 is not listed on IDEAS
- H. Naci Mocan & Erdal Tekin, 2000.
"Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data of Child Care Workers,"
NBER Working Papers
7977, National Bureau of Economic Research, Inc.
- H. Naci Mocan & Erdal Tekin, 2003. "Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data on Child Care Workers," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 38-50, February.
- Mocan, Naci & Tekin, Erdal, 2001. "Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data of Child Care Workers," IZA Discussion Papers 408, Institute for the Study of Labor (IZA).
- David Lewin, 2003. "Incentive Compensation in The Public Sector: Evidence and Potential," Journal of Labor Research, Transaction Publishers, vol. 24(4), pages 597-619, October.
- Francois, Patrick, 2000. "'Public service motivation' as an argument for government provision," Journal of Public Economics, Elsevier, vol. 78(3), pages 275-299, November.
- Preston, Anne E, 1989. "The Nonprofit Worker in a For-Profit World," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 438-63, October.
- Cornes,Richard & Sandler,Todd, 1996. "The Theory of Externalities, Public Goods, and Club Goods," Cambridge Books, Cambridge University Press, number 9780521477185, April.
- repec:rus:hseeco:122160 is not listed on IDEAS
- 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.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.