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Workplace surveillance, privacy protection, and efficiency wages

  • Patrick W. Schmitz

Consider an employer who wants her employee to work hard. As is well known from the e.ciency wage literature, the employer must pay the (wealth-constrained) employee a positive rent to provide incentives for exerting unobservable e.ort. Alternatively, the employer could make effort observable by costly workplace surveillance. It is argued that a privacy protection law preventing surveillance may increase the total surplus. While such a law reduces the employer’s profit, this loss can be overcompensated by the employee’s gain, because the employer invests in surveillance not only to implement higher effort, but also to reduce the employee’s rent.

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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse25_2005.

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Length: 19
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:bon:bonedp:bgse25_2005
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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  1. Schmitz, Patrick W, 2005. "Allocating Control in Agency Problems with Limited Liability and Sequential Hidden Actions," CEPR Discussion Papers 5145, C.E.P.R. Discussion Papers.
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  3. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  4. Schmitz, Patrick W, 2004. "Job Protection Laws and Agency Problems Under Asymmetric Information," CEPR Discussion Papers 4031, C.E.P.R. Discussion Papers.
  5. Dominique Demougin & Claude Fluet, 1996. "Mechanism Sufficient Statistic in the Risk-Neutral Agency Problem," Cahiers de recherche du Département des sciences économiques, UQAM 9602, Université du Québec à Montréal, Département des sciences économiques.
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  7. repec:cup:cbooks:9780521576475 is not listed on IDEAS
  8. Tirole, Jean, 2001. "Corporate Governance," Econometrica, Econometric Society, vol. 69(1), pages 1-35, January.
  9. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  10. Innes, Robert D., 1990. "Limited liability and incentive contracting with ex-ante action choices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 45-67, October.
  11. Oz, Effy & Glass, Richard & Behling, Robert, 1999. "Electronic workplace monitoring: What employees think," Omega, Elsevier, vol. 27(2), pages 167-177, April.
  12. Pitchford, Rohan, 1998. "Moral hazard and limited liability: The real effects of contract bargaining," Economics Letters, Elsevier, vol. 61(2), pages 251-259, November.
  13. Anthony M. Townsend & James T. Bennett, 2003. "Privacy, Technology, and Conflict: Emerging Issues and Action in Workplace Privacy," Journal of Labor Research, Transaction Publishers, vol. 24(2), pages 195-205, April.
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