IDEAS home Printed from https://ideas.repec.org/a/ecj/econjl/v99y1989i397p818-36.html
   My bibliography  Save this article

Effort Observability and Worker Productivity: Towards an Explanation of Economic Dualism

Author

Listed:
  • Esfahani, Hadi S
  • Salehi-Isfahani, Djavad

Abstract

This paper suggests an explanation of the wage and productivity differentials between formal and informal sectors in developing countries. This explanation is based on differences in the observability of effort that arise from technological differences (such as size of operation). The authors argue that observability of effort is lower in the formal sector and then show that, under reasonable conditions, this leads to higher wages and higher effort (productivity). This is because with lower observability the marginal cost of effort is lower when existing employees are induced to work harder than when more workers are hired. Explanations for intersectoral differences in factor intensities and sector-specific unemployment rates also follow from the authors' basic assumptions. Copyright 1989 by Royal Economic Society.

Suggested Citation

  • Esfahani, Hadi S & Salehi-Isfahani, Djavad, 1989. "Effort Observability and Worker Productivity: Towards an Explanation of Economic Dualism," Economic Journal, Royal Economic Society, vol. 99(397), pages 818-836, September.
    • Handle: RePEc:ecj:econjl:v:99:y:1989:i:397:p:818-36
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0013-0133%28198909%2999%3A397%3C818%3AEOAWPT%3E2.0.CO%3B2-1&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:99:y:1989:i:397:p:818-36. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley-Blackwell Digital Licensing or Christopher F. Baum (email available below). General contact details of provider: https://edirc.repec.org/data/resssea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.