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Shirking, Standards And The Probability Of Detection

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  • John G. Sessions
  • John D. SkÃ¥tun

Abstract

By relaxing the common efficiency wage assumption of exogenous shirking detection probabilities, we demonstrate how standards and efficiency wages are related. In a more general setting where the probability of detection depends upon the equilibrium effort level of non†shirkers, we show that the uniformly positive (negative) supply†side relationship between wages (unemployment insurance) and effort is no longer guaranteed. Profit maximization on the part of the firm, however, ensures that effort will depend positively (negatively) on wages (unemployment insurance) in equilibrium.

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  • John G. Sessions & John D. SkÃ¥tun, 2018. "Shirking, Standards And The Probability Of Detection," Bulletin of Economic Research, Wiley Blackwell, vol. 70(2), pages 103-118, April.
    • Handle: RePEc:bla:buecrs:v:70:y:2018:i:2:p:103-118
    DOI: 10.1111/boer.12143
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