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Does Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories

Author

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  • Dickinson, David L.

    (Appalachian State University)

  • Villeval, Marie Claire

    (CNRS, GATE)

Abstract

Agency theory assumes that tighter monitoring by the principal should motivate the agent to raise his effort level whereas the “crowding-out” literature suggests that it may reduce the overall work effort. These two assertions are not necessarily contradictory provided that the nature of the employment relationship is taken into account (Frey, 1993). Based upon a realtask laboratory experiment, our results show that principals are not trustful enough to refrain from monitoring the agents, and most of the agents react to the disciplining effect of monitoring. However we find also some evidence that intrinsic motivation is crowded out when monitoring is above a certain threshold. We identify that both interpersonal principal/agent links and concerns for the distribution of output payoff are important for the emergence of this crowding out effect.

Suggested Citation

  • Dickinson, David L. & Villeval, Marie Claire, 2004. "Does Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories," IZA Discussion Papers 1222, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1222
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    More about this item

    Keywords

    principal-agent theory; monitoring; crowding-out; motivation; real effort experiment;
    All these keywords.

    JEL classification:

    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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