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Does Monitoring Decrease Work Effort?

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Author Info
David Dickinson (Department of Economics - Appalachian State University)
Marie-Claire Villeval (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

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Abstract

Agency theory assumes that tighter monitoring by the principal should motivate agents to increase their effort, whereas the “crowding-out” literature suggests that the opposite may occur. These two assertions are not necessarily contradictory provided that the nature of the employment relationship is taken into account (Frey 1993). Results from controlled laboratory experiments show that many principals engage in costly monitoring, and most agents react to the disciplining effect of monitoring by increasing effort. However, we also find some evidence that effort 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 HAL in its series Post-Print with number halshs-00276284_v1.

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Date of creation: 2008
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Publication status: Published, Games and Economic Behavior / Games and Economic Behaviour, 2008, 63, 1, pp. 56-76
Handle: RePEc:hal:journl:halshs-00276284_v1

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Related research
Keywords: principal-agent theory ; monitoring ; crowding-out ; motivation ; real effort experiment;

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