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Does Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories

Author

Listed:
  • David Dickinson

    (Department of Economics - Appalachian State University - UNC - University of North Carolina System)

  • Marie Claire Villeval

    (GATE - Groupe d'analyse et de théorie économique - UL2 - Université Lumière - Lyon 2 - ENS LSH - Ecole Normale Supérieure Lettres et Sciences Humaines - CNRS - Centre National de la Recherche Scientifique, IZA - Institute for the study of labor - Institute for the Study of Labor - IZA)

Abstract

Agency theory assumes that tighter monitoring by the principal should motivate the agent to raise his effort level whereas the "crowding-out" literature suggests that it may reduce the overall work effort. These two assertions are not necessarily contradictory provided that the nature of the employment relationship is taken into account (Frey, 1993). Based upon a realtask laboratory experiment, our results show that principals are not trustful enough to refrain from monitoring the agents, and most of the agents react to the disciplining effect of monitoring. However we find also some evidence that intrinsic motivation is crowded out when monitoring is above a certain threshold. We identify that both interpersonal principal/agent links and concerns for the distribution of output payoff are important for the emergence of this crowding out effect.

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  • David Dickinson & Marie Claire Villeval, 2004. "Does Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories," Post-Print halshs-00175010, HAL.
    • Handle: RePEc:hal:journl:halshs-00175010
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00175010
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    More about this item

    Keywords

    principal-agent theory; monitoring; crowding-out; motivation; real effort experiment;
    All these keywords.

    JEL classification:

    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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