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Estimating the shirking model with variable effort

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  • Strobl, Eric
  • Walsh, Frank

Abstract

We show in a theoretical efficiency wage model where firms differ in monitoring intensity that the impact of monitoring intensity on wages is ambiguous, a result that mirrors evidence from the empirical literature. We argue that to correctly specify the impact of monitoring on wages, the interaction between monitoring and effort needs to be modelled. Results using a worker, firm panel from Ghana which contains reasonable effort and monitoring proxies show that the return to effort is higher in poorly monitored sectors as the theory suggests.
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  • Strobl, Eric & Walsh, Frank, 2007. "Estimating the shirking model with variable effort," Labour Economics, Elsevier, vol. 14(3), pages 623-637, June.
    • Handle: RePEc:eee:labeco:v:14:y:2007:i:3:p:623-637
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    1. Walsh, Frank, 1999. "A Multisector Model of Efficiency Wages," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 351-376, April.
    2. Goldsmith, Arthur H. & Veum, Jonathan R. & Darity, William Jr., 2000. "Working hard for the money? Efficiency wages and worker effort," Journal of Economic Psychology, Elsevier, vol. 21(4), pages 351-385, August.
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    8. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
    9. Konings, Jozef & Walsh, Patrick P, 1994. "Evidence of Efficiency Wage Payments in UK Firm Level Panel Data," Economic Journal, Royal Economic Society, vol. 104(424), pages 542-555, May.
    10. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    11. Alan B. Krueger, 1991. "Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(1), pages 75-101.
    12. Strobl, Eric & Walsh, Frank, 2002. "Getting It Right: Employment Subsidy or Minimum Wage?," IZA Discussion Papers 662, Institute of Labor Economics (IZA).
    13. Johansson, Per & Palme, Marten, 1996. "Do economic incentives affect work absence? Empirical evidence using Swedish micro data," Journal of Public Economics, Elsevier, vol. 59(2), pages 195-218, February.
    14. Laszlo Goerke, 2008. "On The Relationship Between Wages And Monitoring: A Reply," Metroeconomica, Wiley Blackwell, vol. 59(1), pages 45-46, February.
    15. Laszlo Goerke, 2001. "On the Relationship Between Wages and Monitoring in Shirking Models," Metroeconomica, Wiley Blackwell, vol. 52(4), pages 376-390, November.
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    Cited by:

    1. Nitsa Kasir & Idit Sohlberg, 2018. "The Impact of Supervision and Incentive Process in Explaining Wage Profile and Variance," Papers 1806.01332, arXiv.org.
    2. Zenou, Yves, 2013. "Spatial versus social mismatch," Journal of Urban Economics, Elsevier, vol. 74(C), pages 113-132.
    3. Ourania Karakosta & Nikos Tsakiris, 2009. "Indirect Tax Reforms and Public Goods under Imperfect Competition," University of Cyprus Working Papers in Economics 5-2009, University of Cyprus Department of Economics.
    4. John G. Sessions & Nikolaos Theodoropoulos, 2014. "Tenure, Wage Profiles and Monitoring," Research in Labor Economics, in: New Analyses of Worker Well-Being, volume 38, pages 105-162, Emerald Group Publishing Limited.
    5. Sessions, John G. & Skåtun, John D., 2015. "Shirking, Standards and the Probability of Detection," IZA Discussion Papers 8863, Institute of Labor Economics (IZA).
    6. John G. Sessions & John D. Skåtun, 2017. "Performance-Related Pay, Efficiency Wages and the Shape of the Tenure-Earnings Profile," Manchester School, University of Manchester, vol. 85(3), pages 295-319, June.
    7. Zenou, Yves, 2011. "Explaining the Black/White Employment Gap: The Role of Weak Ties," CEPR Discussion Papers 8582, C.E.P.R. Discussion Papers.
    8. Gareth D. Myles & Hana Yousefi, 2020. "Corruption as an Occupational Choice: Endogenous Corruption and Tax Policy," Southern Economic Journal, John Wiley & Sons, vol. 86(4), pages 1446-1474, April.
    9. John G. Sessions & John D. Skåtun, 2018. "Shirking, Standards And The Probability Of Detection," Bulletin of Economic Research, Wiley Blackwell, vol. 70(2), pages 103-118, April.
    10. Richard A. Parsons, 2013. "An Empirical Test of the Efficiency Wage Hypothesis," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 16(3), pages 369-387.
    11. Jim Malley & Hassan Molana, 2007. "The Relationship between Output and Unemployment with Efficiency Wages," German Economic Review, Verein für Socialpolitik, vol. 8(4), pages 561-577, November.

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    More about this item

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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