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Does Monitoring Decrease Work Effort ? The Complementarity Between Agency and Crowding-Out Theories

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Author Info
Marie-Claire Villeval () (GATE CNRS)
David Dickinson

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Abstract

Agency theory assumes that tighter monitoring by the principal should motivate the agent to raise his effort level whereas the “crowding-out” literature suggests that it may reduce the overall work effort. These two assertions are not necessarily contradictory provided that the nature of the employment relationship is taken into account (Frey, 1993). Based upon a real-task laboratory experiment, our results show that principals are not trustful enough to refrain from monitoring the agents, and most of the agents react to the disciplining effect of monitoring. However we find also some evidence that intrinsic motivation is crowded out when monitoring is above a certain threshold. We identify that both interpersonal principal/agent links and concerns for the distribution of output payoff are important for the emergence of this crowding out effect.

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Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 0409.

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Length: 43 pages
Date of creation: Jan 2004
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Handle: RePEc:gat:wpaper:0409

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Related research
Keywords: Principal-agent theory; Monitoring; Crowding-out; Motivation; Real effort experiment;

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Find related papers by JEL classification:
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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References listed on IDEAS
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.:
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  25. Heath, Chip, 1999. "On the Social Psychology of Agency Relationships: Lay Theories of Motivation Overemphasize Extrinsic Incentives," Organizational Behavior and Human Decision Processes, Elsevier, vol. 78(1), pages 25-62, April. [Downloadable!] (restricted)
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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.)

  1. Tor Eriksson & Marie-Claire Villeval, 2008. "Performance Pay, Sorting and Social Motivation," Post-Print halshs-00331753_v1, HAL. [Downloadable!]
    Other versions:
  2. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A preference-Based Lucas Critique of Public Policy," Working Papers 2009-11, University of Massachusetts Amherst, Department of Economics. [Downloadable!]
    Other versions:
  3. Antoni Cunyat & Randolph Sloof, 2008. "Employee Types and Endogenous Organizational Design," Tinbergen Institute Discussion Papers 08-019/1, Tinbergen Institute. [Downloadable!]
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