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Crowding Effects and Work Ethics

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  • Sverre Grepperud
  • Pål Andreas Pedersen

Abstract

This paper analyses optimal contracts in a principal-agent model where the agent is intrinsically motivated, and there is an endogenous relationship between the structure of incentive payments and intrinsic motivation (crowding effects). The analysis shows that crowding effects have implications for the optimal contract, and that, under some conditions, the principal can make better achievements without implementing any economic incentives. Furthermore, it is shown that when high-powered incentives reduce intrinsic motivation (crowding-out), the first-best solution in a principal-agent framework is unattainable. Copyright 2006 The Authors; Journal compilation 2006 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd..

Suggested Citation

  • Sverre Grepperud & Pål Andreas Pedersen, 2006. "Crowding Effects and Work Ethics," LABOUR, CEIS, vol. 20(1), pages 125-138, March.
  • Handle: RePEc:bla:labour:v:20:y:2006:i:1:p:125-138
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    Cited by:

    1. Alexandros Gabrielsen & Axel Kirchner & Zhuoshi Liu & Paolo Zagaglia, 2015. "Forecasting Value-At-Risk With Time-Varying Variance, Skewness And Kurtosis In An Exponential Weighted Moving Average Framework," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 1-29.
    2. repec:wsi:ijimxx:v:13:y:2009:i:03:n:s1363919609002339 is not listed on IDEAS
    3. Kirti Srivastava & R. Krishna Kumar & M. Swapna & V. Swaroopa Rani & V. Dimri, 2012. "Inundation studies for Nagapattinam region on the east coast of India due to tsunamigenic earthquakes from the Andaman region," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 63(1), pages 211-221, August.

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