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Hiring Strategies and the Evolution of Honesty

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  • Polterovich, Victor
  • Tonis, Alexander

Abstract

The evolution of honesty norms in a society is studied. Our approach is based on the hypothesis that hiring or firing strategies chosen by firms may affect honesty: if it becomes common knowledge in the society that being honest is better for workers than cheating employers, then the share of opportunists gradually go down. It is shown that different hiring strategies are rational under different honesty standards. If honesty is not a prevailing social norm and volumes of appropriated rent may by high enough, then firms are better off to stimulate honest behavior by increasing wages. For a relatively honest society, firing cheaters is the best strategy. If honesty standards are intermediate or citizens are too impatient, ignorance of cheating may be rational. Therefore one observes three possible patterns of honesty evolution: honesty norms may either descend to critically low level or stabilize at some point or rise and fall cyclically. We prove that honesty standard rises as losses from dishonest behavior or hiring cost increase, honesty standard falls as rent appropriation opportunities expand or citizens get more impatient, and high expectations of economic growth promote honesty.

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File URL: http://mpra.ub.uni-muenchen.de/20283/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20053.

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Date of creation: 2005
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Handle: RePEc:pra:mprapa:20053

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Related research

Keywords: Honesty; cheating; hiring strategies; evolution of behavioral norms;

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References

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  1. Martin Raiser & Alan Rousso & Franklin Steves, 2003. "Trust in transition: cross-country and firm evidence," Working Papers 82, European Bank for Reconstruction and Development, Office of the Chief Economist.
  2. Vladimir Popov, 2000. "Shock Therapy Versus Gradualism: The End Of The Debate (Explaining The Magnitude Of Transformational Recession)," Comparative Economic Studies, Palgrave Macmillan, vol. 42(1), pages 1-57, April.
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  7. Polterovich, Victor, 2000. "Civic Culture and Economic Transition in Russia," MPRA Paper 20068, University Library of Munich, Germany.
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Cited by:
  1. Polterovich, V., 2013. "General Social Analysis and Reform Design," Journal of the New Economic Association, New Economic Association, vol. 17(1), pages 185-188.

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