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Limited Intertemporal Commitment and Job Design

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  • Trond Olsen
  • Gaute Torsvik

Abstract

Should workers be given jobs where they have joint responsibility for tasks, or should tasks be separated into different jobs with individual responsibility? Or, if there are more tasks than workers, how should tasks optimally be grouped together? And to what extent should workers be allowed to pursue outside activities while they are at work? Recent work has demonstrated that when the various tasks are substitutes for the worker, static incentive considerations yield the following answers: Separate tasks, and if that is not possible, group together tasks with the same possibility of performance evaluation. Moreover, workers should be given more discretion to pursue outside activities the easier it is to measure their performance on the workplace activity. We show that if a principal who faces an intertemporal commitment problem in her motivation of workers follows these advices, then the negative consequences of the commitment problem are reinforced. More generally, we inquire about optimal job design in an intertemporal agency model, and we find that the answers may be quite different from those obtained on the basis of a static model.

Suggested Citation

  • Trond Olsen & Gaute Torsvik, 1994. "Limited Intertemporal Commitment and Job Design," CESifo Working Paper Series 77, CESifo.
  • Handle: RePEc:ces:ceswps:_77
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    Cited by:

    1. Heski Bar-Isaac, 2007. "Something to prove: reputation in teams," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 495-511, June.
    2. George J. Mailath & Volker Nocke & Andrew Postlewaite, 2004. "Business Strategy, Human Capital, and Managerial Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 617-633, December.
    3. Emmanuelle Auriol & Guido Friebel & Lambros Pechlivanos, 2002. "Career Concerns in Teams," Journal of Labor Economics, University of Chicago Press, vol. 20(2), pages 289-307, Part.
    4. Dongsoo Shin & Roland Strausz, 2014. "Delegation and dynamic incentives," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 495-520, September.
    5. Heski Bar-Isaac, 2004. "Something to Prove: Reputation in teams and hiring to introduce uncertainty," Working Papers 04-07, New York University, Leonard N. Stern School of Business, Department of Economics.
    6. Feltham, Gerald & Indjejikian, Raffi & Nanda, Dhananjay, 2006. "Dynamic incentives and dual-purpose accounting," Journal of Accounting and Economics, Elsevier, vol. 42(3), pages 417-437, December.
    7. Anja Schöttner, 2005. "Relational Contracts and Job Design," SFB 649 Discussion Papers SFB649DP2005-052, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    8. Indjejikian, Raffi & Nanda, Dhananjay, 1999. "Dynamic incentives and responsibility accounting," Journal of Accounting and Economics, Elsevier, vol. 27(2), pages 177-201, April.
    9. Robert Gibbons, 1996. "Incentives and Careers in Organizations," NBER Working Papers 5705, National Bureau of Economic Research, Inc.
    10. Oddvar M. Kaarbøe & Trond E. Olsen, 2008. "Distorted Performance Measures and Dynamic Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 149-183, March.
    11. Koch Alexander K & Morgenstern Albrecht, 2010. "Coordination under the Shadow of Career Concerns," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-40, March.
    12. Fumi Kiyotaki, 2008. "Promotion Tournaments with Multiple Tasks," Birkbeck Working Papers in Economics and Finance 0804, Birkbeck, Department of Economics, Mathematics & Statistics.
    13. Pablo Casas-Arce & Santhi Hejeebu & Cornell College, 2004. "Job Design and the Benefits of Private Trade," Economics Series Working Papers 204, University of Oxford, Department of Economics.
    14. Bardsley, Peter, 2001. "Multi-task agency: a combinatorial model," Journal of Economic Behavior & Organization, Elsevier, vol. 44(2), pages 233-248, February.
    15. Peter O. Christensen & Gerald A. Feltham & Christian Hofmann & Florin Sabac, 2022. "Timeliness, Accuracy, and Relevance in Dynamic Incentive Contracts," Foundations and Trends(R) in Accounting, now publishers, vol. 17(1), pages 1-76, October.
    16. Indjejikian, Raffi & Nanda, Dhananjay, 2003. "Reply to: dynamic incentives and responsibility accounting: a comment," Journal of Accounting and Economics, Elsevier, vol. 35(3), pages 437-441, August.
    17. Christensen, Peter O. & Feltham, Gerald A. & Sabac, Florin, 2003. "Dynamic incentives and responsibility accounting: a comment," Journal of Accounting and Economics, Elsevier, vol. 35(3), pages 423-436, August.
    18. Christensen, Peter O. & Feltham, Gerald A. & Sabac, Florin, 2005. "A contracting perspective on earnings quality," Journal of Accounting and Economics, Elsevier, vol. 39(2), pages 265-294, June.

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    More about this item

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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