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The impact of budget cuts and incentive wages on academic work

  • Johan Willner
  • Sonja Gronblom
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    Recent university reforms tend to mean budget cuts, economic incentives at all levels and a more powerful management, in the spirit of the new public management. Performance-based pay is often motivated through the principal-agent theory where agents would provide inadequate efforts under a fixed-wage regime. We amend the principal-agent model by introducing intrinsic motivation as one side of a multiple self. It turns out that the fixed regime can lead to higher creative efforts and a higher output per employee under reasonable circumstances. Performance-based pay leads to motivation crowding out if the wage approaches the threshold level for quitting.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/02692170903239853
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    Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

    Volume (Year): 23 (2009)
    Issue (Month): 6 ()
    Pages: 673-689

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    Handle: RePEc:taf:irapec:v:23:y:2009:i:6:p:673-689
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