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Employee Crime and the Monitoring Puzzle

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  • Dickens, William T
  • Katz, Lawrence F
  • Lang, Kevin
  • Summers, Lawrence H

Abstract

The simplest economic theories of crime predict that profit-maximizing firms should follow strategies of minimal monitoring with large penalties for employee crime. The authors investigate possible reasons why firms actually spend considerable resources trying to detect employee malfeasance. They find that the most plausible explanations for firms' large outlays on monitoring of employees--legal restrictions on penalty clauses in contracts and the adverse impact of harsh punishment schemes on worker morale--are also consistent with the payment of premium (rent-generating) wages by cost-minimizing firms. Coauthors are Lawrence F. Katz, Kevin Lang, and Lawrence H. Summers. Copyright 1989 by University of Chicago Press.

Suggested Citation

  • Dickens, William T & Katz, Lawrence F & Lang, Kevin & Summers, Lawrence H, 1989. "Employee Crime and the Monitoring Puzzle," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 331-347, July.
    • Handle: RePEc:ucp:jlabec:v:7:y:1989:i:3:p:331-47
    DOI: 10.1086/298211
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    References listed on IDEAS

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    1. Eaton, Curtis & White, William D, 1983. "The Economy of High Wages: An Agency Problem," Economica, London School of Economics and Political Science, vol. 50(198), pages 175-181, May.
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    3. Patrick Bolton., 1987. "The Principle of Maximum Deterrence Revisited," Economics Working Papers 8749, University of California at Berkeley.
    4. Barry Nalebuff & David Scharfstein, 1987. "Testing in Models of Asymmetric Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(2), pages 265-277.
    5. 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.
    6. Raff, Daniel M G & Summers, Lawrence H, 1987. "Did Henry Ford Pay Efficiency Wages?," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 57-86, October.
    7. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(4), pages 543-569.
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