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Economic models of employee motivation

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  • Joseph A. Ritter
  • Lowell J. Taylor
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    Abstract

    Workers, being human beings, present employers with a range of tricky problems. Humans, unlike filing cabinets, can be crooked, subversive, surly, or indolent, even if they are paid on time. In this article we explore economists' main models of how compensation is used to address employee motivation and how these models help to explain puzzling features of the labor market.

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    File URL: http://research.stlouisfed.org/wp/more/1997-006
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    Bibliographic Info

    Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1997-006.

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    Date of creation: 1997
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    Publication status: Published in Federal Reserve Bank of St. Louis Review, September/October 1997, 79(5)
    Handle: RePEc:fip:fedlwp:1997-006

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    Keywords: Wages ; Management ; Labor market;

    References

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    1. Dickens, William T, et al, 1989. "Employee Crime and the Monitoring Puzzle," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 331-47, July.
    2. Baker, George & Gibbons, Robert & Murphy, Kevin J, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1125-56, November.
    3. Carmichael, H Lorne, 1989. "Self-Enforcing Contracts, Shirking, and Life Cycle Incentives," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 65-83, Fall.
    4. Hutchens, Robert M, 1989. "Seniority, Wages and Productivity: A Turbulent Decade," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 49-64, Fall.
    5. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
    6. Jeremy I. Bulow & Lawrence H. Summers, 1985. "A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination and Keynesian Unemployment," NBER Working Papers 1666, National Bureau of Economic Research, Inc.
    7. Rebitzer, James B & Taylor, Lowell J, 1995. "Efficiency Wages and Employment Rents: The Employer-Size Wage Effect in the Job Market for Lawyers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 678-708, October.
    8. Michael C. Jensen & Kevin J. Murphy, 1990. "Ceo Incentives - It'S Not How Much You Pay, But How," Journal of Applied Corporate Finance, Morgan Stanley, vol. 3(3), pages 36-49.
    9. Ritter, Joseph A & Taylor, Lowell J, 1994. "Workers as Creditors: Performance Bonds and Efficiency Wages," American Economic Review, American Economic Association, vol. 84(3), pages 694-704, June.
    10. Leonard, Jonathan S, 1987. "Carrots and Sticks: Pay, Supervision, and Turnover," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S136-52, October.
    11. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
    12. Cappelli, Peter & Chauvin, Keith, 1991. "An Interplant Test of the Efficiency Wage Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 769-87, August.
    13. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
    14. Annable, James, 1988. "Another auctioneer is missing," Journal of Macroeconomics, Elsevier, vol. 10(1), pages 1-26.
    15. Gibbons, Robert & Katz, Lawrence F, 1992. "Does Unmeasured Ability Explain Inter-industry Wage Differentials?," Review of Economic Studies, Wiley Blackwell, vol. 59(3), pages 515-35, July.
    16. Thaler, Richard H, 1989. "Interindustry Wage Differentials," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 181-93, Spring.
    17. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
    18. Akerlof, George A & Katz, Lawrence F, 1989. "Workers' Trust Funds and the Logic of Wage Profiles," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 525-36, August.
    19. Daniel M.G. Raff & Lawrence H. Summers, 1986. "Did Henry Ford Pay Efficiency Wages?," NBER Working Papers 2101, National Bureau of Economic Research, Inc.
    20. Krueger, Alan B, 1991. "Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 75-101, February.
    21. Hutchens, Robert M, 1987. "A Test of Lazear's Theory of Delayed Payment Contracts," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S153-70, October.
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    Cited by:
    1. Rocheteau, Guillaume, 2001. "Equilibrium unemployment and wage formation with matching frictions and worker moral hazard," Labour Economics, Elsevier, vol. 8(1), pages 75-102, January.
    2. W. Bentley MacLeod & Daniel Parent, 1999. "Job characteristics, wages, and the employment contract," Review, Federal Reserve Bank of St. Louis, issue May, pages 13-27.
    3. Bryan Engelhardt & Guillaume Rocheteau & Peter Rupert, 2007. "Crime and the labor market: a search model with optimal contracts," Working Paper 0715, Federal Reserve Bank of Cleveland.

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