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The Economic Payoff of Creating Good Job Conditions: Theory and Evidence from Latin America

Listed author(s):
  • Chaparro, Juan
  • Lora, Eduardo

Based on Akerlof and Kranton (2005), who argue that group identity and social norms influence individual preferences towards work effort, a model is developed to understand why firms create good job conditions, taking into account the cost of implementing them and their impact on wages and productivity. Then, using individual-level data from the Gallup World Poll for 18 Latin American countries, the main predictions of the model are tested using propensity score matching. We find a positive link between good job conditions, workers’ labor income and productivity when there are several simultaneous signals of a good work environment. We conclude that there is a positive payoff of investing in good job conditions for both workers and firms.

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File URL: http://purl.umn.edu/169810
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Paper provided by Agricultural and Applied Economics Association in its series 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota with number 169810.

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Date of creation: 2014
Handle: RePEc:ags:aaea14:169810
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  1. Nicholas Bloom & Carol Propper & Stephan Seiler & John Van Reenen, 2015. "The Impact of Competition on Management Quality: Evidence from Public Hospitals," Review of Economic Studies, Oxford University Press, vol. 82(2), pages 457-489.
  2. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 91-114, Fall.
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  10. Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1351-1408.
  11. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  12. Nicholas Bloom & Aprajit Mahajan & David McKenzie & John Roberts, 2010. "Why Do Firms in Developing Countries Have Low Productivity?," American Economic Review, American Economic Association, vol. 100(2), pages 619-623, May.
  13. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
  14. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  15. Miriam Bruhn & Dean Karlan & Antoinette Schoar, 2010. "What Capital Is Missing in Developing Countries?," American Economic Review, American Economic Association, vol. 100(2), pages 629-633, May.
  16. George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1125-1156.
  17. Gary Fields, 2012. "Challenges and policy lessons for the growth-employment-poverty nexus in developing countries," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-24, December.
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