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Efficiency Wages with Endogenous Monitoring

Author

Listed:
  • Yanay Farja

    (Tel-Hai College)

  • Ori Zax

    (Faculty of Economics, Ashkelon Academic College)

Abstract

In the standard efficiency wage model, the monitoring level chosen by firms is exogenous and observable. In this paper, the level of monitoring is endogenized—chosen by firms and unobserved by workers. As a result, firms have an incentive to decrease the monitoring of employees for any given beliefs among workers about the chosen level of monitoring. We show that sufficiently patient firms are able to retain some control over the monitoring level. We also show that high-tech firms monitor their workers more and demand a higher level of effort than do low-tech firms.

Suggested Citation

  • Yanay Farja & Ori Zax, 2020. "Efficiency Wages with Endogenous Monitoring," Economics Bulletin, AccessEcon, vol. 40(1), pages 248-261.
    • Handle: RePEc:ebl:ecbull:eb-19-00620
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2020/Volume40/EB-20-V40-I1-P23.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Efficiency wages; Repeated Games; Relational contracts;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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