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The Crowding-Out of Work Ethics

Author

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  • Grepperud, Sverre

    (Institute of Health Management and Health Economics)

  • Pedersen, Pål Andreas

    (Bodø Graduate School of Business)

Abstract

This paper analyses optimal contracts in a principal-agent model where the agent is intrinsically motivated at the outset and there is an endogenous relationship between the structure of incentive payments and intrinsic motivation (crowding effects). The analysis shows that crowding effects have implications for the optimal contract and that under some conditions the principal can do better without implementing any economic incentives. Furthermore, it is shown that when high-powered incentives diminish intrinsic motivation (crowding-out) the first-best solution in a principal-agent framework is unattainable.

Suggested Citation

  • Grepperud, Sverre & Pedersen, Pål Andreas, 2009. "The Crowding-Out of Work Ethics," HERO Online Working Paper Series 2001:4, University of Oslo, Health Economics Research Programme.
    • Handle: RePEc:hhs:oslohe:2001_004
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    File URL: http://www.hero.uio.no/publicat/2001/HERO2001_4.pdf
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    Cited by:

    1. Rostam J. Neuwirth, 2017. "Global Law and Sustainable Development: Change and the “Developing–Developed Country” Terminology," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 29(4), pages 911-925, August.
    2. Carl Chiarella & Peter Flaschel & Hing Hung, 2006. "Interacting Business Cycle Fluctuations: A Two-Country Model," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 51(03), pages 365-394.
    3. Imre Kondor & István Varga-Haszonits, 2010. "Instability Of Portfolio Optimization Under Coherent Risk Measures," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 13(03), pages 425-437.
    4. Yew-Kwang Ng, 2006. "Do the Economies of Specialization Justify the Work Ethics? A Further Examination of Buchanan's Hypothesis," Annals of Economics and Finance, Society for AEF, vol. 7(2), pages 385-403, November.

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    More about this item

    Keywords

    Agency theory; intrinsic motivation; crowding effects;
    All these keywords.

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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