IDEAS home Printed from https://ideas.repec.org/p/bol/bodewp/wp883.html
   My bibliography  Save this paper

The Lemons Problem in a Labor Market with Intrinsic Motivation. When Higher Salaries Pay Worse Workers

Author

Listed:
  • F. Barigozzi
  • N. Burani
  • D. Raggi

Abstract

We study the Lemons Problem when workers have private information on both their skills and their intrinsic motivation. When workers are motivated, ine¢ ciencies due to adverse selection are mitigated and a change in salaries may have unexpected consequences. With a su¢ ciently strong and positive association between motivation and productivity, a wage increase may attract less motivated and also less productive workers. When the association is positive but small, it instead may attract more productive and also more motivated workers. Our theoretical analysis reconciles contrasting empirical evidence on vocational sectors such as for public servants, teachers, health professionals and politicians. Our results also inform the current policy debate on whether it is possible to improve the overall quality of workers by changing their salary.

Suggested Citation

  • F. Barigozzi & N. Burani & D. Raggi, 2013. "The Lemons Problem in a Labor Market with Intrinsic Motivation. When Higher Salaries Pay Worse Workers," Working Papers wp883, Dipartimento Scienze Economiche, Universita' di Bologna.
  • Handle: RePEc:bol:bodewp:wp883
    as

    Download full text from publisher

    File URL: http://amsacta.unibo.it/3837/1/WP883.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
    2. Mattozzi, Andrea & Merlo, Antonio, 2008. "Political careers or career politicians?," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 597-608, April.
    3. Freeman, Richard B, 1997. "Working for Nothing: The Supply of Volunteer Labor," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 140-166, January.
    4. Barigozzi, Francesca & Burani, Nadia, 2013. "Intrinsic Motivation in the Labor Market: Not Too Much, Thank You," AICCON Working Papers 124-2013, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
    5. Bargain, Olivier & Melly, Blaise, 2008. "Public Sector Pay Gap in France: New Evidence Using Panel Data," IZA Discussion Papers 3427, Institute for the Study of Labor (IZA).
    6. Delfgaauw, Josse & Dur, Robert, 2007. "Signaling and screening of workers' motivation," Journal of Economic Behavior & Organization, Elsevier, vol. 62(4), pages 605-624, April.
    7. Francois, Patrick, 2000. "'Public service motivation' as an argument for government provision," Journal of Public Economics, Elsevier, vol. 78(3), pages 275-299, November.
    8. Heyes, Anthony, 2005. "The economics of vocation or 'why is a badly paid nurse a good nurse'?," Journal of Health Economics, Elsevier, vol. 24(3), pages 561-569, May.
    9. Messner, Matthias & Polborn, Mattias K., 2004. "Paying politicians," Journal of Public Economics, Elsevier, vol. 88(12), pages 2423-2445, December.
      • Matthias Messner & Mattias Polborn, 2003. "Paying Politicians," Working Papers 246, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    10. Michael A. Shields, 2004. "Addressing nurse shortages: what can policy makers learn from the econometric evidence on nurse labour supply?," Economic Journal, Royal Economic Society, vol. 114(499), pages 464-498, November.
    11. Emanuela Antonazzo & Anthony Scott & Diane Skatun & Robert. F. Elliott, 2003. "The labour market for nursing: a review of the labour supply literature," Health Economics, John Wiley & Sons, Ltd., vol. 12(6), pages 465-478.
    12. Delfgaauw, Josse & Dur, Robert, 2010. "Managerial talent, motivation, and self-selection into public management," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 654-660, October.
    13. Ernesto Dal Bó & Frederico Finan & Martín A. Rossi, 2013. "Strengthening State Capabilities: The Role of Financial Incentives in the Call to Public Service," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1169-1218.
    14. Stefano Gagliarducci & Tommaso Nannicini, 2013. "Do Better Paid Politicians Perform Better? Disentangling Incentives From Selection," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 369-398, April.
    15. Sean P. Corcoran & William N. Evans & Robert M. Schwab, 2004. "Changing Labor-Market Opportunities for Women and the Quality of Teachers, 1957-2000," American Economic Review, American Economic Association, vol. 94(2), pages 230-235, May.
    16. Josse Delfgaauw & Robert Dur, 2008. "Incentives and Workers' Motivation in the Public Sector," Economic Journal, Royal Economic Society, vol. 118(525), pages 171-191, January.
    17. Becchetti, Leonardo & Castriota, Stefano & Tortia, Ermanno, 2009. "Productivity, wages and intrinsic motivation in social enterprises," AICCON Working Papers 66-2009, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
    18. Michael P. Keane & Antonio Merlo, 2010. "Money, Political Ambition, and the Career Decisions of Politicians," American Economic Journal: Microeconomics, American Economic Association, vol. 2(3), pages 186-215, August.
    19. Antonio Merlo & Vincenzo Galasso & Massimiliano Landi & Andrea Mattozzi, 2008. "the Labor Market of Italian Politicians, Second Version," PIER Working Paper Archive 09-024, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 May 2009.
    20. F. Barigozzi & N. Burani, 2013. "Bidimensional screening with intrinsically motivated workers," Working Papers wp866, Dipartimento Scienze Economiche, Universita' di Bologna.
    21. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    22. Francesca Barigozzi & Gilberto Turati, 2012. "Human health care and selection effects. Understanding labor supply in the market for nursing1," Health Economics, John Wiley & Sons, Ltd., vol. 21(4), pages 477-483, April.
    23. Leete, Laura, 2001. "Whither the Nonprofit Wage Differential? Estimates from the 1990 Census," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 136-170, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. F. Barigozzi & N. Burani, 2014. "Competition and Screening with Skilled and Motivated Workers," Working Papers wp953, Dipartimento Scienze Economiche, Universita' di Bologna.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bol:bodewp:wp883. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dipartimento Scienze Economiche, Universita' di Bologna). General contact details of provider: http://edirc.repec.org/data/sebolit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.