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Estimating the shirking model with variable effort

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  • Eric Strobl
  • Frank Walsh

Abstract

We show in a theoretical efficiency wage model where firms differ in monitoring intensity that the impact of monitoring intensity on wages is ambiguous, a result that mirrors evidence from the empirical literature. We argue that to correctly specify the impact of monitoring on wages, the interaction between monitoring and effort needs to be modelled. Results using a worker, firm panel from Ghana which contains reasonable effort and monitoring proxies show that the return to effort is higher in poorly monitored sectors as the theory suggests.

Suggested Citation

  • Eric Strobl & Frank Walsh, 2007. "Estimating the shirking model with variable effort," Open Access publications 10197/8056, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:oapubs:10197/8056
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    File URL: http://hdl.handle.net/10197/8056
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    1. Johansson, Per & Palme, Marten, 1996. "Do economic incentives affect work absence? Empirical evidence using Swedish micro data," Journal of Public Economics, Elsevier, vol. 59(2), pages 195-218, February.
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    7. Peter Cappelli & Keith Chauvin, 1991. "An Interplant Test of the Efficiency Wage Hypothesis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 769-787.
    8. Faria, Joao Ricardo, 2000. "Supervision and effort in an intertemporal efficiency wage model: the role of the Solow condition," Economics Letters, Elsevier, vol. 67(1), pages 93-98, April.
    9. Teal, Francis, 1996. "The Size and sources of economic rents in a developing country manufacturing labour market," Economic Journal, Royal Economic Society, vol. 106(437), pages 963-976, July.
    10. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
    11. Konings, Jozef & Walsh, Patrick P, 1994. "Evidence of Efficiency Wage Payments in UK Firm Level Panel Data," Economic Journal, Royal Economic Society, vol. 104(424), pages 542-555, May.
    12. Laszlo Goerke, 2001. "On the Relationship Between Wages and Monitoring in Shirking Models," Metroeconomica, Wiley Blackwell, vol. 52(4), pages 376-390, November.
    13. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    14. Alan B. Krueger, 1991. "Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(1), pages 75-101.
    15. Strobl, Eric & Walsh, Frank, 2002. "Getting It Right: Employment Subsidy or Minimum Wage?," IZA Discussion Papers 662, Institute of Labor Economics (IZA).
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    Cited by:

    1. John G. Sessions & John D. Skåtun, 2017. "Performance-Related Pay, Efficiency Wages and the Shape of the Tenure-Earnings Profile," Manchester School, University of Manchester, vol. 85(3), pages 295-319, June.
    2. Nitsa Kasir & Idit Sohlberg, 2018. "The Impact of Supervision and Incentive Process in Explaining Wage Profile and Variance," Papers 1806.01332, arXiv.org.
    3. John G. Sessions & Nikolaos Theodoropoulos, 2014. "Tenure, Wage Profiles and Monitoring," Research in Labor Economics, in: New Analyses of Worker Well-Being, volume 38, pages 105-162, Emerald Group Publishing Limited.
    4. Zenou, Yves, 2013. "Spatial versus social mismatch," Journal of Urban Economics, Elsevier, vol. 74(C), pages 113-132.
    5. Zenou, Yves, 2011. "Explaining the Black/White Employment Gap: The Role of Weak Ties," CEPR Discussion Papers 8582, C.E.P.R. Discussion Papers.
    6. Gareth D. Myles & Hana Yousefi, 2020. "Corruption as an Occupational Choice: Endogenous Corruption and Tax Policy," Southern Economic Journal, John Wiley & Sons, vol. 86(4), pages 1446-1474, April.
    7. John G. Sessions & John D. Skåtun, 2018. "Shirking, Standards And The Probability Of Detection," Bulletin of Economic Research, Wiley Blackwell, vol. 70(2), pages 103-118, April.
    8. Ourania Karakosta & Nikos Tsakiris, 2009. "Indirect Tax Reforms and Public Goods under Imperfect Competition," University of Cyprus Working Papers in Economics 5-2009, University of Cyprus Department of Economics.
    9. Richard A. Parsons, 2013. "An Empirical Test of the Efficiency Wage Hypothesis," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 16(3), pages 369-387.
    10. repec:bla:germec:v:8:y:2007:i::p:561-577 is not listed on IDEAS
    11. Sessions, John G. & Skåtun, John D., 2015. "Shirking, Standards and the Probability of Detection," IZA Discussion Papers 8863, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Efficiency wages; Effort; Monitoring intensity; Efficiency wages; Supervision; Size;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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