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Employee Crime and the Monitoring Puzzle

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Author Info

  • Summers, Lawrence H.
  • Dickens, William T.
  • Katz, Lawrence F.
  • Lang, Kevin

Abstract

The simplest economic theories of crime predict that profit-maximizing firms should follow strategies of minimal monitoring with large penalties for employee crime. We investigate possible reasons why firms actually spend considerable resources trying to detect employee malfeasance. We find that the most plausible explanations for firms' large outlays on monitoring of employees-legal restrictions on penalty clauses in contracts and the adverse impact of harsh punishment schemes on worker morale-are also consistent with the payment of premium (rent-generating) wages by cost-minimizing firms.

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File URL: http://dash.harvard.edu/bitstream/handle/1/3645199/Summers_EmployeeCrime.pdf
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Bibliographic Info

Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3645199.

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Date of creation: 1989
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Publication status: Published in Journal of Labor Economics
Handle: RePEc:hrv:faseco:3645199

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  1. Eaton, Curtis & White, William D, 1983. "The Economy of High Wages: An Agency Problem," Economica, London School of Economics and Political Science, vol. 50(198), pages 175-81, May.
  2. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  3. Wessels, Walter J, 1980. "The Effect of Minimum Wages in the Presence of Fringe Benefits: An Expanded Model," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 293-313, April.
  4. Nalebuff, Barry & Scharfstein, David, 1987. "Testing in Models of Asymmetric Information," Review of Economic Studies, Wiley Blackwell, vol. 54(2), pages 265-77, April.
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