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Ownership, Agency and Wages: An Examination of the Fast Food Industry

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  • Alan Krueger

Abstract

This paper estimates the difference in compensation between company-owned and franchisee-owned fast food restaurants. The contrast is of interest because contractual arrangements give managers of company-owned outlets less of an incentive to monitor and supervise employees. Estimates based on two data sets suggest that employee compensation is slightly greater at company-owned outlets than franchisee-owned outlets. The earnings gap is 9 percent for assistant and shift managers and 2 percent for full-time crew workers. Furthermore. the tenure-earnings profile is steeper at company-owned restaurants. These findings suggest that monitoring difficulties influence the timing and generosity of compensation.

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File URL: http://arks.princeton.edu/ark:/88435/dsp01r207tp33r
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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 606.

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Date of creation: Sep 1987
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Handle: RePEc:pri:indrel:dsp01r207tp33r

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Postal: Firestone Library, Princeton, New Jersey 08544-2098
Phone: 609 258-4041
Fax: 609 258-2907
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Web page: http://www.irs.princeton.edu/
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Related research

Keywords: agency; efficiency wages; fast food; wage differentials;

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References

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  1. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
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  3. Rubin, Paul H, 1978. "The Theory of the Firm and the Structure of the Franchise Contract," Journal of Law and Economics, University of Chicago Press, vol. 21(1), pages 223-33, April.
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  5. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  6. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-39, May.
  7. Akerlof, George A & Katz, Lawrence F, 1989. "Workers' Trust Funds and the Logic of Wage Profiles," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 525-36, August.
  8. Jonathan S. Leonard, 1987. "Carrots and Sticks: Pay, Supervision and Turnover," NBER Working Papers 2176, National Bureau of Economic Research, Inc.
  9. Mathewson, G Frank & Winter, Ralph A, 1985. "The Economics of Franchise Contracts," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 503-26, October.
  10. Klein, Benjamin & Saft, Lester F, 1985. "The Law and Economics of Franchise Tying Contracts," Journal of Law and Economics, University of Chicago Press, vol. 28(2), pages 345-61, May.
  11. Mellow, Wesley, 1982. "Employer Size and Wages," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 495-501, August.
  12. Joanne Salop & Steve Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
  13. Norton, Seth W, 1988. "An Empirical Look at Franchising as an Organizational Form," The Journal of Business, University of Chicago Press, vol. 61(2), pages 197-218, April.
  14. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
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  16. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 619-27, November.
  17. Jacob Mincer & Boyan Jovanovic, 1979. "Labor Mobility and Wages," NBER Working Papers 0357, National Bureau of Economic Research, Inc.
  18. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  19. Lazear, Edward P & Moore, Robert L, 1984. "Incentives, Productivity, and Labor Contracts," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 275-96, May.
  20. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
  21. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  22. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
  23. Calvo, Guillermo A & Wellisz, Stanislaw, 1978. "Supervision, Loss of Control, and the Optimum Size of the Firm," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 943-52, October.
  24. Eaton, B Curtis & White, William D, 1982. "Agent Compensation and the Limits of Bonding," Economic Inquiry, Western Economic Association International, vol. 20(3), pages 330-43, July.
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Cited by:
  1. Michael Ian Cragg, 1995. "Performance Incentives in Government Subcontracting: Evidence from the Job Training Partnership Act (JTPA)," Labor and Demography 9507001, EconWPA.

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