Job Design and Incentives

This paper studies the problem of how to allocate n =2 independent tasks among an ndogenously determined number of jobs in a setting with risk neutral workers subject to limited liability and ex-post asymmetric information. The main message is that firms narrow down the scope of their jobs to deal with workers’ incentives to game the performance system (workers’ incentives to work harder in tasks that are well rewarded ex-post and to underperform in tasks that are poorly rewarded). Firms’ incentives to narrow job scopes are diminished when workers are intrinsically motivated by moral standards and, in contrast to Holmström and Milgrom (1991), when the degree to which tasks are substitutes increases. JEL-Classification: J41, J24, D21.