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Incentives Beyond the Money: Identity and Motivational Capital in Public Organizations

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Abstract

This paper explores optimality of contracts and incentives when the principal (public organisation) can undertake investments to change agents’ (public workers) identity. In the model, workers within the organisation can have different identities. We develop a principal-agent dynamical model with moral hazard, which captures the possibility of affecting this workers’ identity through contracts offered by the firm. In the model, identity is a motivation source which reduces agents’ isutility from effort. We use the term identity to refer to a situation in which the worker shares the organisational objectives and views herself as a part of the organisation. Contrary, we use the term conflict to refer to a ituation in which workers behave self-interested and frequently in the opposite way of the organisation. We assume that identity can be achieved when principal include mission-sense developing investments in contracts. By mission we mean a single culture that is shared by all the members of an organization. We discuss the conditions under which spending resources in changing workers’ identity and invest in this kind of motivational capital is optimal for organisations. Our results may help to inform public firms’ managers about the optimal design of incentive schemes and policies. For instance, we conclude that investing in motivational capital is the best option in the long run whereas pure monetary incentives works better in the short run.

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  • Mikel Berdud & Juan M. Cabasés & Jorge Nieto, 2012. "Incentives Beyond the Money: Identity and Motivational Capital in Public Organizations," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 1214, Departamento de Economía - Universidad Pública de Navarra.
  • Handle: RePEc:nav:ecupna:1214
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    References listed on IDEAS

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    Cited by:

    1. Mikel Berdud & Juan M. Cabasés Hita & Jorge Nieto, 2014. "A Pilot Inquiry on Incentives and Intrinsic Motivation in Health Care: the Motivational Capital Explained by Doctors," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 1401, Departamento de Economía - Universidad Pública de Navarra.

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    More about this item

    Keywords

    contracts; moral hazard; identity; socialization; mission; motivational capital.;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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