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Employee Crime and the Monitoring Puzzle

Author

Listed:
  • Summers, Lawrence H.
  • Dickens, William T.
  • Katz, Lawrence F.
  • Lang, Kevin

Abstract

The simplest economic theories of crime predict that profit-maximizing firms should follow strategies of minimal monitoring with large penalties for employee crime. We investigate possible reasons why firms actually spend considerable resources trying to detect employee malfeasance. We find that the most plausible explanations for firms' large outlays on monitoring of employees-legal restrictions on penalty clauses in contracts and the adverse impact of harsh punishment schemes on worker morale-are also consistent with the payment of premium (rent-generating) wages by cost-minimizing firms.

Suggested Citation

  • Summers, Lawrence H. & Dickens, William T. & Katz, Lawrence F. & Lang, Kevin, 1989. "Employee Crime and the Monitoring Puzzle," Scholarly Articles 3645199, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:3645199
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    References listed on IDEAS

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    1. repec:bla:econom:v:50:y:1983:i:198:p:175-81 is not listed on IDEAS
    2. Raff, Daniel M G & Summers, Lawrence H, 1987. "Did Henry Ford Pay Efficiency Wages?," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 57-86, October.
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    4. Wessels, Walter J, 1980. "The Effect of Minimum Wages in the Presence of Fringe Benefits: An Expanded Model," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 293-313, April.
    5. Barry Nalebuff & David Scharfstein, 1987. "Testing in Models of Asymmetric Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(2), pages 265-277.
    6. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    7. Patrick Bolton., 1987. "The Principle of Maximum Deterrence Revisited," Economics Working Papers 8749, University of California at Berkeley.
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