Gift-Exchange, Incentives, and Heterogeneous Workers

By incorporating reciprocity in an otherwise standard principal-agent model, I investigate the relation between monetary gift-exchange and incentive pay, while allowing for worker heterogeneity. I assume that some, but not all, workers care more for their principal when they are convinced that the principal cares for them. The principal can be egoistic or altruistic. Absent worker heterogeneity, an altruistic principal signals his altruism by offering relatively weak incentives and a relatively high expected total compensation. However, the latter is not always required to credibly signal altruism. Furthermore, since some workers do not reciprocate the principal’s altruism, the principal may find it optimal to write a contract that simultaneously signals his altruism and screens reciprocal worker types. Such a contract is characterised by excessively strong incentives and a relatively high expected total compensation.reciprocity, gift-exchange, signaling game, incentive contracts, screening

Agency theory and social interactions at work

The main aim of this paper is to show that even when integrating the findings of behavioral economics, agency theory’s conception of interactions at work does not actually account for cooperative behavior. The paper draws on the distinction between the concepts of individual and person to critically examine this conception and show that, while work is mostly organized on the assumption that workers are self-interested individuals, management rhetoric addresses workers as persons in an attempt to prompt their cooperation and personal commitment. This managerial paradox may partly be due to the prevalent influence of agency theory’s prescriptions and has been contributing to a severe deterioration of the quality of working life. But it also indicates that agency theory has to confront serious theoretical and prescriptive dilemmas.info:eu-repo/semantics/acceptedVersio

Individuals, persons and agency theory – contrasted views on social interactions at work

The paper draws on the distinction between the concepts of individual and person to show how management rhetoric addresses workers as persons whereas actual management practices organize work as if workers were opportunistic individuals. We argue that this paradox is partly due to the widespread influence of agency theory whose conception of the firm, based on the agency costs generated by the supposedly non-cooperative workers’ behavior, became an influential normative model. Our argument is that agency theory’s basic assumption powerfully contributed to further and legitimize the ongoing power shift from labor to capital. Major institutional changes in corporate governance regulation are required to make firms’ behavior consistent with their rhetoric.FC

Social Relations and Relational Incentives

This paper studies how social relationships between managers and employees affect relational incentive contracts. To this end we develop a simple dynamic principal-agent model where both players may have feelings of altruism or spite toward each other. The contract may contain two types of incentives for the agent to work hard: a bonus and a threat of dismissal. We find that good social relationships undermine the credibility of a threat of dismissal but strengthen the credibility of a bonus. Among others, these two mechanisms imply that better social relationships sometimes lead to higher bonuses, while worse social relationships may increase productivity and players' utility in equilibrium

Employee Recognition and Performance: A Field Experiment

This paper reports the results from a controlled field experiment designed to investigate the causal effect of public recognition on employee performance. We hired more than 300 employees to work on a three-hour data-entry task. In a random sample of work groups, workers unexpectedly received recognition after two hours of work. We find that recognition increases subsequent performance substantially, and particularly so when recognition is exclusively provided to the best performers. Remarkably, workers who did not receive recognition are mainly responsible for this performance increase. This result is consistent with workers having a preference for conformity

Employee recognition and performance: a field experiment

This paper reports the results from a controlled field experiment designed to investigate the causal effect of public recognition on employee performance. We hired more than 300 employees to work on a three-hour data-entry task. In a random sample of work groups, workers unexpectedly received recognition after two hours of work. We find that recognition increases subsequent performance substantially, and particularly so when recognition is exclusively provided to the best performers. Remarkably, workers who did not receive recognition are mainly responsible for this performance increase. This result is consistent with workers having a preference for conformity

No mission? No motivation. On hospitals' organizational form and charity care provision

A healthcare provider faces two decision problems. On the one hand, it chooses its organizational form: a hospital can be a for-profit institution providing compensated care only, or it can be a nonprofit organization whose mission is enhancing access to care for uninsured, low-income patients. On the other hand, the provider chooses which health professionals to hire, without observing their heterogeneous skills and their pro-social motivation. These decisions are related because an increase in the percentage of revenues, that the nonprofit hospital sacrifices for charity care, might enhance the motivation of its workers and induce some of them to donate their labor, that is, to volunteer. Accordingly, this article analyzes the provider's optimal screening contracts, which are contingent on workers' ability and satisfy limited liability, and relates them to the optimal choice of its mission-orientation. The results provide a new rationale for: (Formula presented.) the emergence of different organizational forms for hospitals, such as for-profits and nonprofits, which complement public hospitals in the provision of health care, (Formula presented.) the heterogeneity in the degree of charity care chosen by different nonprofit hospitals

The (De)Politicisation of Work – An Inquiry into the Political Function of Work

The paper revisits the debate on the political function of work, defined as the contribution of work to the production and transformation of social relations, in both conceptual and empirical terms. It begins by briefly recalling the terms of the debate about the emancipatory potential of work as seen by Karl Marx and Hannah Arendt, and then proceeds to argue, contra Arendt, that since work is a collective and cooperative activity, it is not a-political. The major contribution of the paper consists of discussing the issue by critically considering the literature on both economic theories of the firm and labour economics, two strands of literature usually kept apart. We regard the quantification and individualisation trends that characterise the contemporary world of work as a de-politicisation process, one linked to the (mainstream) agency theory of the firm which legitimises financialisation. We conclude by outlining a way in which to re-politicise work and the firm.Este artigo revisita o debate sobre a função política do trabalho, definido como o contributo do trabalho para a produção e transformação de relações sociais, tanto em termos conceituais como em termos empíricos. Inicia-se com um breve relance dos termos do debate sobre o potencial emancipatório do trabalho, conforme perspetivado por Karl Marx e Hannah Arendt, argumentando de seguida, contra Arendt que, como o trabalho é uma atividade coletiva e cooperativa, ele não é apolítico. O principal contributo do artigo consiste em discutir a questão através de uma abordagem crítica da literatura sobre as teorias económicas da empresa e sobre a economia do trabalho, duas vertentes da literatura geralmente mantidas separadas. Consideramos as tendências de quantificação e individualização que caracterizam o mundo do trabalho contemporâneo como um processo de despolitização, processo ligado à teoria da agência, uma teoria da empresa que legitima a financiarização. Concluímos delineando uma forma de repolitizar o trabalho e a empresa.Cet article revisite le débat sur la fonction politique du travail, définie comme une contribution du travail à la production et à la transformation de rapports sociaux, débat mené tant en termes conceptuels qu’en termes empiriques. Nous commençons par brièvement rappeler les termes du débat sur le potentiel émancipatoire du travail, selon Karl Marx, potentiel que Hannah Arendt dénie. Contra Arendt, nous soutenons que, comme le travail est une activité collective et coopérative, il n’est pas apolitique. La principale contribution de cet article est de débattre cette question à travers une approche critique de la littérature sur les théories économiques de l’entreprise et sur l’économie du travail, deux volets généralement maintenus séparés dans la littérature économique. Les tendances de quantification et d’individualisation qui caractérisent le monde du travail contemporain constituent, selon nous, un processus de dépolitisation, processus lié à la théorie de l’agence de l’entreprise qui légitime la financiarisation. En guise de conclusion, nous traçons les pourtours de ce qui pourrait être une façon de repolitiser le travail et l’entreprise

Leadership Styles and Labor-Market Conditions

Why do some leaders use praise as a means to motivate workers, whereas other leaders use social punishment? This paper develops a simple economic model to examine how leadership styles depend on the prevailing labor market conditions for workers. We show that the existence of a binding wage floor for workers (e.g., due to trade union wage bargaining, minimum wage legislation, or limited-liability protection) can make it attractive for firms to hire a leader who makes use of social punishment. Although the use of social punishments generally is socially inefficient, it lessens the need for high bonus pay, which allows the firm to extract rents from the worker. In contrast, firms hire leaders who provide praise to workers only if it is socially efficient to do so. Credible use of leadership styles requires either repeated interaction or a leader with the right social preferences. In a single-period setting, only moderately altruistic leaders use praise as a motivation tool, whereas only moderately spiteful leaders use social punishment. Lastly, we show that when the leaders’ and workers’ reservation utilities give rise to a bigger income gap between leaders and workers, attracting spiteful leaders becomes relatively less costly and unfriendly leadership becomes more prevalent