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Screening workers for ability and motivation

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  • Francesca Barigozzi
  • Nadia Burani

Abstract

We study the screening problem of a firm that hires workers without knowing their ability or their intrinsic motivation. We completely characterise the set of optimal contracts (consisting of observable effort levels and non-linear salaries) that depend on how workers’ heterogeneity in ability relates to the heterogeneity in motivation. Accordingly, optimal contracts differ as to whether ability or motivation prevails in determining workers’ performance. We show that full separation and full participation of workers’ types is always implemented, when feasible, because it is preferred by the firm to either pooling or excluding some workers. Moreover, when ability prevails, there exist full screening contracts such that motivated workers are asked to provide the efficient level of effort, and such that the firm pays low information rents to its workers. Despite this fact, the firm makes higher profits when motivation rather than ability prevails because of labour donations from motivated workers.

Suggested Citation

  • Francesca Barigozzi & Nadia Burani, 2016. "Screening workers for ability and motivation," Oxford Economic Papers, Oxford University Press, vol. 68(2), pages 627-650.
    • Handle: RePEc:oup:oxecpp:v:68:y:2016:i:2:p:627-650.
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    File URL: http://hdl.handle.net/10.1093/oep/gpw005
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    Cited by:

    1. Dur, Robert & van Lent, Max, 2018. "Serving the public interest in several ways: Theory and empirics," Labour Economics, Elsevier, vol. 51(C), pages 13-24.
    2. Alessandro Fedele & Pierpaolo Giannoccolo, 2020. "Paying Politicians: Not Too Little, Not Too Much," Economica, London School of Economics and Political Science, vol. 87(346), pages 470-489, April.
    3. De Chiara, Alessandro & Manna, Ester, 2022. "Firms' ownership, employees’ altruism, and product market competition," Economic Modelling, Elsevier, vol. 109(C).
    4. Barigozzi, Francesca & Manna, Ester, 2020. "Envy in mission-oriented organisations," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 395-424.
    5. F. Barigozzi & N. Burani, 2016. "Competition Between For-Profit and Non-Profit Firms: Incentives, Workers Self-Selection, and Wage Differentials," Working Papers wp1072, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Barigozzi, Francesca & Burani, Nadia & Raggi, Davide, 2018. "Productivity crowding-out in labor markets with motivated workers," Journal of Economic Behavior & Organization, Elsevier, vol. 151(C), pages 199-218.
    7. Barigozzi, Francesca & Burani, Nadia, 2016. "Competition and screening with motivated health professionals," Journal of Health Economics, Elsevier, vol. 50(C), pages 358-371.
    8. Cerrone Claudia & Manna Ester, 2018. "Pay for Performance with Motivated Employees," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(1), pages 1-8, January.
    9. Carroll David & Parasnis Jaai & Tani Massimiliano, 2021. "Why do women become teachers while men don’t?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 21(2), pages 793-823, April.
    10. Burani, Nadia & Palestini, Arsen, 2016. "What determines volunteer work? On the effects of adverse selection and intrinsic motivation," Economics Letters, Elsevier, vol. 144(C), pages 29-32.
    11. Nadia Burani, 2021. "No mission? No motivation. On hospitals' organizational form and charity care provision," Health Economics, John Wiley & Sons, Ltd., vol. 30(12), pages 3203-3219, December.
    12. Daniel G. Arce, 2017. "Screening for Managerial Objectives," Southern Economic Journal, John Wiley & Sons, vol. 84(2), pages 442-455, October.
    13. Barigozzi, Francesca & Burani, Nadia, 2019. "Competition for talent when firms' mission matters," Games and Economic Behavior, Elsevier, vol. 116(C), pages 128-151.

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