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Monitoring and Pay

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Author Info

  • Allgulin, Magnus

    (Dept. of Economics, Stockholm School of Economics)

  • Ellingsen, Tore

    ()
    (Dept. of Economics, Stockholm School of Economics)

Abstract

The shirking model of efficiency wages has been thought to imply that monitoring and pay are substitute instruments for motivating workers. We demonstrate that this result hinges critically on restrictive assumptions regarding workers' choice of effort - for example that there are only two possible effort levels. Under more reasonable assumptions, monitoring and pay are complementary instruments. Another result is that there is a non-monotonic relationship between the wage level and the workers' rents. Finally, much of the empirical literature on the monitoring-pay relationship is shown to be seriously misguided.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 245.

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Length: 24 pages
Date of creation: 16 Jun 1998
Date of revision: 22 Nov 1999
Handle: RePEc:hhs:hastef:0245

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Keywords: Monitoring; efficiency wages; incentive pay.;

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Cited by:
  1. Sessions, John G. & Theodoropoulos, Nikolaos, 2008. "Tenure, Wage Profiles and Monitoring," IZA Discussion Papers 3307, Institute for the Study of Labor (IZA).
  2. Ross, Stephen L. & Zenou, Yves, 2008. "Are shirking and leisure substitutable? An empirical test of efficiency wages based on urban economic theory," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 498-517, September.
  3. Rebitzer, James B. & Taylor, Lowell J., 2011. "Extrinsic Rewards and Intrinsic Motives: Standard and Behavioral Approaches to Agency and Labor Markets," Handbook of Labor Economics, Elsevier.
  4. Jacoby, Hanan G. & Mansuri, Ghazala, 2009. "Incentives, supervision, and sharecropper productivity," Journal of Development Economics, Elsevier, vol. 88(2), pages 232-241, March.
  5. Dittrich, Dennis & Kocher, Martin, 2006. "Monitoring and Pay: An Experiment on Employee under Endogenous Supervision," CEPR Discussion Papers 5962, C.E.P.R. Discussion Papers.
  6. M Guerrazzi, 2008. "A Dynamic Efficiency-Wage Model with Continuous Effort and Externalities," Economic Issues Journal Articles, Economic Issues, vol. 13(2), pages 37-58, September.
  7. Dittrich, Dennis A. V. & Kocher, Martin G., 2011. "Monitoring and Pay: An Experiment on Employee Performance under Endogenous Supervision," Discussion Papers in Economics 12222, University of Munich, Department of Economics.
  8. Sarah Brown & Fathi Fakhfakh & John G. Sessions, . "Wages, Supervision and Sharing," Discussion Papers in Public Sector Economics 00/4, Department of Economics, University of Leicester.
  9. Ourania Karakosta & Nikos Tsakiris, 2009. "Indirect Tax Reforms and Public Goods under Imperfect Competition," University of Cyprus Working Papers in Economics 5-2009, University of Cyprus Department of Economics.
  10. Sarah Brown & Robert McNabb & Karl Taylor, 2006. "Firm Performance, Worker Commitment and Loyalty," Working Papers 2006005, The University of Sheffield, Department of Economics, revised Apr 2006.
  11. Pablo González, 2002. "Profit Sharing Reconsidered: Efficiency Wages and Renegotiation Costs," Documentos de Trabajo 151, Centro de Economía Aplicada, Universidad de Chile.

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