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Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry


  • Alan B. Krueger


This paper estimates the difference in compensation between company-owned and franchisee-owned fast food restaurants. The contrast is of interest because contractual arrangements give managers of company-owned outlets less of an incentive to monitor and supervise employees. Estimates based on two data sets suggest that employee compensation is slightly greater at company-owned outlets than at franchisee-owned outlets. The earnings gap is 9 percent for assistant and shift managers and 2 percent for full-time crew workers. Furthermore, the tenure-earnings profile is steeper at company-owned restaurants. These findings suggest that monitoring difficulties influence the timing and generosity of compensation.

Suggested Citation

  • Alan B. Krueger, 1991. "Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 75-101.
  • Handle: RePEc:oup:qjecon:v:106:y:1991:i:1:p:75-101.

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    References listed on IDEAS

    1. Orazem, Peter F, 1987. "Black-White Differences in Schooling Investment and Human Capital Production in Segregated Schools," American Economic Review, American Economic Association, vol. 77(4), pages 714-723, September.
    2. Fishback, Price V, 1989. "Can Competition among Employers Reduce Governmental Discrimination? Coal Companies and Segregated Schools in West Virginia in the Early 1900s," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 311-328, October.
    3. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
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