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Estimating the shirking model with variable effort

  • STROBL, Eric
  • WALSH, Frank

We show in a theoretical efficiency wage model where firms differ in monitoring intensity or in the effort intensity of their technologies that the impact of monitoring intensity on wages is ambiguous, a result that mirrors evidence from the empirical literature. We argue that to correctly specify the impact of monitoring on wages, the interaction between monitoring and effort needs to be modelled. Results using a worker, firm panel from Ghana which contains reasonable effort andmonitoring proxies show that the return to effort is higher in poorly monitored sectors as the theory suggests.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2003075.

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Date of creation: 00 Oct 2003
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Handle: RePEc:cor:louvco:2003075
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  1. Faria, Joao Ricardo, 2000. "Supervision and effort in an intertemporal efficiency wage model: the role of the Solow condition," Economics Letters, Elsevier, vol. 67(1), pages 93-98, April.
  2. Black, Dan A & Garen, John E, 1991. "Efficiency Wages and Equilibrium Wages," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 525-40, July.
  3. Cappelli, Peter & Chauvin, Keith, 1991. "An Interplant Test of the Efficiency Wage Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 769-87, August.
  4. Laszlo Goerke, 2001. "On the Relationship Between Wages and Monitoring in Shirking Models," Metroeconomica, Wiley Blackwell, vol. 52(4), pages 376-390, November.
  5. Walsh, Frank, 1999. "A Multisector Model of Efficiency Wages," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 351-76, April.
  6. Strobl, Eric & Walsh, Frank, 2002. "Getting It Right: Employment Subsidy or Minimum Wage?," IZA Discussion Papers 662, Institute for the Study of Labor (IZA).
  7. J Konings & Patrick Paul Walsh, 1993. "Evidence of Efficiency Wage Payments in UK Firm Level Panel Data," CEP Discussion Papers dp0138, Centre for Economic Performance, LSE.
  8. Goldsmith, Arthur H. & Veum, Jonathan R. & Darity, William Jr., 2000. "Working hard for the money? Efficiency wages and worker effort," Journal of Economic Psychology, Elsevier, vol. 21(4), pages 351-385, August.
  9. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
  10. Johansson, Per & Palme, Marten, 1996. "Do economic incentives affect work absence? Empirical evidence using Swedish micro data," Journal of Public Economics, Elsevier, vol. 59(2), pages 195-218, February.
  11. Teal, Francis, 1996. "The Size and sources of economic rents in a developing country manufacturing labour market," Economic Journal, Royal Economic Society, vol. 106(437), pages 963-76, July.
  12. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
  13. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  14. Laszlo Goerke, 2008. "On The Relationship Between Wages And Monitoring: A Reply," Metroeconomica, Wiley Blackwell, vol. 59(1), pages 45-46, 02.
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