Respect as an Incentive
AbstractAssuming 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 endogeneous. 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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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5200.
Length: 44 pages
Date of creation: Sep 2010
Date of revision:
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Other versions of this item:
- Tor Eriksson & Marie Claire Villeval, 2010. "Respect as an Incentive," Post-Print halshs-00522697, HAL.
- Eriksson, Tor & Villeval, Marie Claire, 2010. "Respect as an Incentive," Working Papers 10-8, University of Aarhus, Aarhus School of Business, Department of Economics.
- Tor Eriksson & Marie-Claire Villeval, 2010. "Respect as an Incentive," Working Papers 1023, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-09 (All new papers)
- NEP-CBE-2010-10-09 (Cognitive & Behavioural Economics)
- NEP-EXP-2010-10-09 (Experimental Economics)
- NEP-LAB-2010-10-09 (Labour Economics)
- NEP-MIC-2010-10-09 (Microeconomics)
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