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Workplace surveillance, privacy protection, and efficiency wages

  • Schmitz, Patrick W.

Consider an employer who wants her employee to work hard. As is well known from the e.ciency wage literature, the employer must pay the (wealth-constrained) employee a positive rent to provide incentives for exerting unobservable e.ort. Alternatively, the employer could make effort observable by costly workplace surveillance. It is argued that a privacy protection law preventing surveillance may increase the total surplus. While such a law reduces the employer’s profit, this loss can be overcompensated by the employee’s gain, because the employer invests in surveillance not only to implement higher effort, but also to reduce the employee’s rent.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 12 (2005)
Issue (Month): 6 (December)
Pages: 727-738

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Handle: RePEc:eee:labeco:v:12:y:2005:i:6:p:727-738
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Schmitz, Patrick W., 2004. "Job protection laws and agency problems under asymmetric information," European Economic Review, Elsevier, vol. 48(5), pages 1027-1046, October.
  2. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  3. Tirole, Jean, 1999. "Corporate Governance," CEPR Discussion Papers 2086, C.E.P.R. Discussion Papers.
  4. Dominique Demougin & Claude Fluet, 1998. "Mechanism Sufficient Statistic in the Risk-Neutral Agency Problem," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(4), pages 622-, December.
  5. repec:cup:cbooks:9780521576475 is not listed on IDEAS
  6. Patrick W. Schmitz, 2005. "Allocating Control in Agency Problems with Limited Liability and Sequential Hidden Actions," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 318-336, Summer.
  7. 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.
  8. Anthony M. Townsend & James T. Bennett, 2003. "Privacy, Technology, and Conflict: Emerging Issues and Action in Workplace Privacy," Journal of Labor Research, Transaction Publishers, vol. 24(2), pages 195-205, April.
  9. Pitchford, Rohan, 1998. "Moral hazard and limited liability: The real effects of contract bargaining," Economics Letters, Elsevier, vol. 61(2), pages 251-259, November.
  10. Oz, Effy & Glass, Richard & Behling, Robert, 1999. "Electronic workplace monitoring: What employees think," Omega, Elsevier, vol. 27(2), pages 167-177, April.
  11. MacLeod, W Bentley & Malcomson, James M, 1989. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Econometrica, Econometric Society, vol. 57(2), pages 447-80, March.
  12. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  13. Yeon-Koo Che & Seung-Weon Yoo, 2001. "Optimal Incentives for Teams," American Economic Review, American Economic Association, vol. 91(3), pages 525-541, June.
  14. Innes, Robert D., 1990. "Limited liability and incentive contracting with ex-ante action choices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 45-67, October.
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