Advanced Search
MyIDEAS: Login to save this paper or follow this series

Tenure, Wage Profiles and Monitoring

Contents:

Author Info

  • John G. Sessions
  • Nikolaos Theodoropoulos

Abstract

Efficiency wage theory predicts that firms can induce worker effort by the carrot of high wages and / or the stick of monitoring worker performance. Another option available to firms is to tilt the remuneration package over time such that the lure of high future earnings acts as a deterrent to current shirking. In this paper we undertake the first empirical investigation of this relationship between the slope of the wage-tenure profile and the level of monitoring. On the assumption that firms strive for the optimal trade-off between these various instruments, we hypothesise that increased monitoring leads to a decline in the slope of the wage-tenure profile. Our empirical analysis, using two cross sections of matched employer-employee British data, provides robust support for this prediction.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/05-09.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 4-2009.

as in new window
Length: 40 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:ucy:cypeua:4-2009

Contact details of provider:
Web page: http://www.econ.ucy.ac.cy

Related research

Keywords: Monitoring; Tenure; Efficiency; Wages.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Cappelli, Peter & Chauvin, Keith, 1991. "An Interplant Test of the Efficiency Wage Hypothesis," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(3), pages 769-87, August.
  2. Krueger, Alan B, 1991. "Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(1), pages 75-101, February.
  3. Medoff, James L & Abraham, Katharine G, 1980. "Experience, Performance, and Earnings," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 95(4), pages 703-36, December.
  4. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(3), pages 526-38, June.
  5. Laszlo Goerke, 2008. "On The Relationship Between Wages And Monitoring: A Reply," Metroeconomica, Wiley Blackwell, vol. 59(1), pages 45-46, 02.
  6. J Konings & Patrick Paul Walsh, 1993. "Evidence of Efficiency Wage Payments in UK Firm Level Panel Data," CEP Discussion Papers dp0138, Centre for Economic Performance, LSE.
  7. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December.
  8. Raff, Daniel M G & Summers, Lawrence H, 1987. "Did Henry Ford Pay Efficiency Wages?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 5(4), pages S57-86, October.
  9. Jeremy I. Bulow & Lawrence H. Summers, 1985. "A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination and Keynesian Unemployment," NBER Working Papers 1666, National Bureau of Economic Research, Inc.
  10. Judith K. Hellerstein & David Neumark, 1995. "Are Earnings Profiles Steeper Than Productivity Profiles? Evidence from Israeli Firm-Level Data," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 89-112.
  11. D. Gale Johnson, 1950. "Resource Allocation under Share Contracts," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 58, pages 111.
  12. Bai, Chong-en, 1997. "Earnings profile and monitoring under asymmetric information," Economics Letters, Elsevier, vol. 57(2), pages 219-225, December.
  13. Wolpin, Kenneth I, 1977. "Education and Screening," American Economic Review, American Economic Association, vol. 67(5), pages 949-58, December.
  14. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 352.
  15. Gordon, David M, 1994. "Bosses of Different Stripes: A Cross-National Perspective on Monitoring and Supervision," American Economic Review, American Economic Association, vol. 84(2), pages 375-79, May.
  16. Brunello, Giorgio, 1995. "The Relationship between Supervision and Pay: Evidence from the British New Earnings Survey," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(3), pages 309-21, August.
  17. Carmichael, H Lorne, 1989. "Self-Enforcing Contracts, Shirking, and Life Cycle Incentives," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 65-83, Fall.
  18. Bradley T. Ewing & James E. Payne, 1999. "The Trade-Off Between Supervision and Wages: Evidence of Efficiency Wages from the NLSY," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 424-432, October.
  19. Strobl, Eric & Walsh, Frank, 2007. "Estimating the shirking model with variable effort," Labour Economics, Elsevier, vol. 14(3), pages 623-637, June.
  20. Gourieroux, Christian & Monfort, Alain & Renault, Eric & Trognon, Alain, 1987. "Generalised residuals," Journal of Econometrics, Elsevier, Elsevier, vol. 34(1-2), pages 5-32.
  21. 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.
  22. Enrico Moretti & Jeffrey M. Perloff, 2002. "Efficiency Wages, Deferred Payments, and Direct Incentives in Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 84(4), pages 1144-1155.
  23. FitzRoy, Felix R & Kraft, Korenelius, 1987. "Cooperation, Productivity, and Profit Sharing," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(1), pages 23-35, February.
  24. Smith Freeman, 1977. "Wage Trends as Performance Displays Productive Potential: A Model and Application to Academic Early Retirement," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 419-443, Autumn.
  25. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  26. Erica L. Groshen & Alan B. Krueger, 1989. "The structure of supervision and pay in hospitals," Working Paper 8907, Federal Reserve Bank of Cleveland.
  27. James L. Medoff & Katharine G. Abraham, 1981. "Are Those Paid More Really More Productive? The Case of Experience," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 186-216.
  28. Sarah Brown & John G. Sessions, 2006. "Some Evidence on the Relationship between Performance-Related Pay and the Shape of the Experience-Earnings Profile," Southern Economic Journal, Southern Economic Association, vol. 72(3), pages 660-676, January.
  29. Jonathan S. Leonard, 1987. "Carrots and Sticks: Pay, Supervision and Turnover," NBER Working Papers 2176, National Bureau of Economic Research, Inc.
  30. Arai, Mahmood, 1999. "Wages, Profits and Capital Intensity: Evidence from Matched Worker-Firm Data," Research Papers in Economics, Stockholm University, Department of Economics 1999:3, Stockholm University, Department of Economics.
  31. Magnus Allgulin & Tore Ellingsen, 2002. "Monitoring and Pay," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 20(2), pages 201-216, Part.
  32. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(4), pages 543-69, November.
  33. Harris, Milton & Holstrom, Bengt, 1982. "A Theory of Wage Dynamics," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 49(3), pages 315-33, July.
  34. Polachek,Solomon W. & Siebert,W. Stanley, 1993. "The Economics of Earnings," Cambridge Books, Cambridge University Press, number 9780521367288, 9.
  35. Vroman, S. B., 1990. "The union-nonunion wage differential and monitoring costs," Economics Letters, Elsevier, vol. 32(4), pages 405-409, April.
  36. Gordon, David M, 1990. "Who Bosses Whom? The Intensity of Supervision and the Discipline of Labor," American Economic Review, American Economic Association, vol. 80(2), pages 28-32, May.
  37. Hellerstein, Judith K & Neumark, David & Troske, Kenneth R, 1999. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(3), pages 409-46, July.
  38. Loewenstein, George F & Sicherman, Nachum, 1991. "Do Workers Prefer Increasing Wage Profiles?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 9(1), pages 67-84, January.
  39. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues 92-28, Federal Reserve Bank of Chicago.
  40. Walsh, Frank, 1999. "A Multisector Model of Efficiency Wages," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(2), pages 351-76, April.
  41. Machin, Stephen & Manning, Alan, 1992. "Testing Dynamic Models of Worker Effort," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 10(3), pages 288-305, July.
  42. Barth, Erling, 1997. "Firm-Specific Seniority and Wages," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 15(3), pages 495-506, July.
  43. Hutchens, Robert M, 1989. "Seniority, Wages and Productivity: A Turbulent Decade," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 49-64, Fall.
  44. 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.
  45. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  46. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
  47. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, Econometric Society, vol. 54(3), pages 679-85, May.
  48. Neal, Derek, 1993. "Supervision and Wages across Industries," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 409-17, August.
  49. Rebitzer, James B., 1995. "Is there a trade-off between supervision and wages? An empirical test of efficiency wage theory," Journal of Economic Behavior & Organization, Elsevier, vol. 28(1), pages 107-129, September.
  50. Lazear, Edward P & Moore, Robert L, 1984. "Incentives, Productivity, and Labor Contracts," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 99(2), pages 275-96, May.
  51. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 66, pages 281.
  52. Lazear, Edward P, 2000. "The Future of Personnel Economics," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(467), pages F611-39, November.
  53. Frank, Robert H. & Hutchens, Robert M., 1993. "Wages, seniority, and the demand for rising consumption profiles," Journal of Economic Behavior & Organization, Elsevier, vol. 21(3), pages 251-276, August.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ucy:cypeua:4-2009. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.