Screening, Competition, and Job Design: Economic Origins of Good Jobs
AbstractIn recent decades, many firms offered more discretion to their employees, often increasing the productivity of effort but also leaving more opportunities for shirking. These "high-performance work systems" are difficult to understand in terms of standard moral hazard models. We show experimentally that complementarities between high effort discretion, rent-sharing, screening opportunities, and competition are important driving forces behind these new forms of work organization. We document in particular the endogenous emergence of two fundamentally distinct types of employment strategies. Employers either implement a control strategy, which consists of low effort discretion and little or no rent-sharing, or they implement a trust strategy, which stipulates high effort discretion and substantial rent-sharing. If employers cannot screen employees, the control strategy prevails, while the possibility of screening renders the trust strategy profitable. The introduction of competition substantially fosters the trust strategy, reduces market segmentation, and leads to large welfare gains for both employers and employees.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4710.
Length: 46 pages
Date of creation: Jan 2010
Date of revision:
Publication status: published in: American Economic Review, 2012, 102 (2), 834-864
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Other versions of this item:
- Bjorn Bartling & Ernst Fehr & Klaus M. Schmidt, 2012. "Screening, Competition, and Job Design: Economic Origins of Good Jobs," American Economic Review, American Economic Association, vol. 102(2), pages 834-64, April.
- Björn Bartling & Ernst Fehr & Klaus M. Schmidt, 2010. "Screening, competition, and job design: economic origins of good jobs," IEW - Working Papers 470, Institute for Empirical Research in Economics - University of Zurich.
- Bartling, Björn & Fehr, Ernst & Schmidt, Klaus M., 2009. "Screening, Competition, and Job Design Economic Origins of Good Jobs," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 297, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Bartling, Björn & Fehr, Ernst & Schmidt, Klaus M., 2010. "Screening, Competition, and Job Design: Economic Origins of Good Jobs," CEPR Discussion Papers 7658, C.E.P.R. Discussion Papers.
- Björn Bartling & Ernst Fehr & Klaus M. Schmidt, 2010. "Screening, Competition, and Job Design: Economic Origins of Good Jobs," SOEPpapers on Multidisciplinary Panel Data Research 263, DIW Berlin, The German Socio-Economic Panel (SOEP).
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-13 (All new papers)
- NEP-BEC-2010-02-13 (Business Economics)
- NEP-CBE-2010-02-13 (Cognitive & Behavioural Economics)
- NEP-CSE-2010-02-13 (Economics of Strategic Management)
- NEP-CTA-2010-02-13 (Contract Theory & Applications)
- NEP-LAB-2010-02-13 (Labour Economics)
- NEP-LTV-2010-02-13 (Unemployment, Inequality & Poverty)
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