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Shirking, Standards and the Probability of Detection

Author

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  • Sessions, John G.

    (Newcastle University)

  • Skåtun, John D.

    (University of Aberdeen)

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.

Suggested Citation

  • Sessions, John G. & Skåtun, John D., 2015. "Shirking, Standards and the Probability of Detection," IZA Discussion Papers 8863, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp8863
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    References listed on IDEAS

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    More about this item

    Keywords

    efficiency wages; standards; monitoring;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms

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