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Respect as an Incentive

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  • Tor Eriksson

    ()
    (Department of Economics, Aarhus School of Business, Aarhus University: Frichshuset, Hermodsvej 22, 8230 Åbyhøj, Denmark)

  • Marie-Claire Villeval

    ()
    (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; ENS-LSH, Lyon, France)

Abstract

Assuming that people care not only about what others do but also on what others think, we study respect as a non-monetary source of motivation in a context where the length of the employment relationship is endogenous. In our three-stage gift-exchange experiment, the employer can express respect by giving the employee costly symbolic rewards after observing his level of effort. This experiment sheds light on the extent to which symbolic rewards are used, how they affect employees’ further effort, the duration of relationships, and the profits of employers. Furthermore, we study whether employers’ decisions to give symbolic rewards are driven by strategic considerations, by manipulating the bargaining power of employers and employees. We find that employers make use of symbolic rewards and chiefly to express their satisfaction with the employee. Indeed, symbolic rewards are more frequently used when there is excess supply of labor in the market while they are used in almost the same proportion when the market is balanced and when there is excess demand of labor. They are associated with higher profits and increased probability of continuing employment relationships. Overall, however, the opportunity of expressing respect does not improve efficiency compared with an environment in which it does not exist, possibly due to a crowding-out of extrinsic incentives by the availability of non-monetary incentives.

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File URL: ftp://ftp.gate.cnrs.fr/RePEc/2010/1023.pdf
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Bibliographic Info

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 1023.

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Length: 44 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:gat:wpaper:1023

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Keywords: Respect; Symbolic rewards; Incentives; Labor market; Experiment;

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