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Self-control and the rise and fall of factory discipline

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  • Hiller, Victor

Abstract

We propose a dynamic general equilibrium model that accounts for the historical pattern of the rise and fall of factory discipline in the course of economic development. Firms have two alternative means to increase work effort: discipline and control vs. monetary incentives. A key ingredient of our model lies in the fact that workers suffer from present-bias. We show that this lack of self-control makes discipline relatively cheap when workers' outside option is low even in the absence of moral hazard. Then, as one economy develops, it endogenously goes through three stages where firms successively use low-powered monetary incentives, factory discipline and then high-powered monetary incentives. When moral hazard is introduced, multiple development paths may emerge.

Suggested Citation

  • Hiller, Victor, 2018. "Self-control and the rise and fall of factory discipline," Journal of Development Economics, Elsevier, vol. 133(C), pages 187-200.
  • Handle: RePEc:eee:deveco:v:133:y:2018:i:c:p:187-200
    DOI: 10.1016/j.jdeveco.2018.02.004
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    More about this item

    Keywords

    Economic development; Time-inconsistency; Organizational changes; Monetary incentives; Factory discipline;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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