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Extrinsic Rewards and Intrinsic Motives: Standard and Behavioral Approaches To Agency and Labor Markets

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  • James B. Rebitzer
  • Lowell J. Taylor

Abstract

Employers structure pay and employment relationships to mitigate agency problems. A large literature in economics documents how the resolution of these problems shapes personnel policies and labor markets. For the most part, the study of agency in employment relationships relies on highly stylized assumptions regarding human motivation, e.g., that employees seek to earn as much money as possible with minimal effort. In this essay, we explore the consequences of introducing behavioral complexity and realism into models of agency within organizations. Specifically, we assess the insights gained by allowing employees to be guided by such motivations as the desire to compare favorably to others, the aspiration to contribute to intrinsically worthwhile goals, and the inclination to reciprocate generosity or exact retribution for perceived wrongs. More provocatively, from the standpoint of standard economics, we also consider the possibility that people are driven, in ways that may be opaque even to themselves, by the desire to earn social esteem or to shape and reinforce identity.

Suggested Citation

  • James B. Rebitzer & Lowell J. Taylor, 2010. "Extrinsic Rewards and Intrinsic Motives: Standard and Behavioral Approaches To Agency and Labor Markets," Economics Working Paper Archive wp_607, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_607
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    2. Ted Pinchbeck, 2016. "Taking Care of the Budget? Practice-level Outcomes during Commissioning Reforms in England," SERC Discussion Papers 0192, Spatial Economics Research Centre, LSE.
    3. Gravelle, Hugh & Liu, Dan & Propper, Carol & Santos, Rita, 2019. "Spatial competition and quality: Evidence from the English family doctor market," Journal of Health Economics, Elsevier, vol. 68(C).
    4. Manthei, Kathrin & Sliwka, Dirk & Vogelsang, Timo, 2019. "Talking about Performance or Paying for it? Evidence from a Field Experiment," IZA Discussion Papers 12446, Institute of Labor Economics (IZA).
    5. James B. Rebitzer & Mark E. Votruba, 2011. "Organizational Economics and Physician Practices," NBER Working Papers 17535, National Bureau of Economic Research, Inc.
    6. Brigham Frandsen & James B. Rebitzer, 2014. "Structuring Incentives Within Organizations: The Case of Accountable Care Organizations," NBER Working Papers 20034, National Bureau of Economic Research, Inc.
    7. Pepper, Alexander & Gore, Julie, 2014. "The economic psychology of incentives: An international study of top managers," Journal of World Business, Elsevier, vol. 49(3), pages 350-361.
    8. Andrea Bassanini & Thomas Breda & Eve Caroli & Antoine Rebérioux, 2010. "Working in family firms: less paid but more secure? Evidence from French matched employer-employee data," Working Papers halshs-00564972, HAL.
    9. Dr Alex Bryson & John Forth, 2012. "CEO Bonding: Who Posts Performance Bonds and Why?," National Institute of Economic and Social Research (NIESR) Discussion Papers 389, National Institute of Economic and Social Research.
    10. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    11. Rudy Douven & Minke Remmerswaal & Robin Zoutenbier, 2015. "Do Extrinsically Motivated Mental Health Care Providers Have Better Treatment Outcomes?," CPB Discussion Paper 319.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    12. Pepper, Alexander & Gore, Julie, 2014. "The economic psychology of incentives: an international study of top managers," LSE Research Online Documents on Economics 51655, London School of Economics and Political Science, LSE Library.
    13. Axelson, Ulf & Bond, Philip, 2015. "Wall Street occupations," LSE Research Online Documents on Economics 37448, London School of Economics and Political Science, LSE Library.
    14. Rudy Douven & Minke Remmerswaal & Robin Zoutenbier, 2015. "Do Extrinsically Motivated Mental Health Care Providers Have Better Treatment Outcomes?," CPB Discussion Paper 319, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Madonia, Greg & Smith, Austin C., 2019. "All-In or checked-out? Disincentives and selection in income share agreements," Journal of Economic Behavior & Organization, Elsevier, vol. 161(C), pages 52-67.
    16. Nicolas da Silva, 2012. "Motivation et performance des médecins. Un examen de la littérature empirique," Post-Print hal-01480872, HAL.
    17. Kondo, Ayako & Shoji, Masahiro, 2019. "Peer effects in employment status: Evidence from housing lotteries," Journal of Urban Economics, Elsevier, vol. 113(C).
    18. Smithers, Samuel, 2015. "Goals, motivation and gender," Economics Letters, Elsevier, vol. 131(C), pages 75-77.

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    More about this item

    Keywords

    Agency; Motivation; Employment Relationships; Behavioral Economics;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • J0 - Labor and Demographic Economics - - General
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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