Posted Content•
Risk Attitudes and Shirking on the Quality of Work under Monitoring: Evidence from a Real-Effort Task Experiment
01 Jan 2014-Research Papers in Economics (THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise)-
TL;DR: In this paper, the effects of risk attitudes on effort exerted under different monitoring schemes were investigated, and it was shown that shirking decreases with risk aversion, being female, and monitoring.
Abstract: This paper studies the effects of risk attitudes on effort exerted under different monitoring schemes. Our design employs a theoretical model that relaxes the assumption that agents are risk neutral and investigates changes in the effort and quality of work as monitoring varies. The predictions of the theoretical model are tested in an original experimental setting in which levels of risk attitudes are measured and monitoring rates vary exogenously. Our results show that shirking decreases with risk aversion, being female, and monitoring. Moreover, monitoring is more effective at curtailing shirking behaviors with subjects who are less risk averse, although the size of the impact is small.
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TL;DR: This article focuses on a tractable procedure initially proposed by Holt and Laury (2002) to elicit risk attitude and generalizes this method to measure utility and risk aversion, and uses the outcome scale rather than the probability scale in the menu of choices.
Abstract: Risk attitude is known to be a key determinant of various economic and financial choices. Behavioral studies that aim to evaluate the role of risk attitudes in contexts of this type, therefore, require tools for measuring individual risk tolerance. Recent developments in decision theory provide such tools. However, the methods available can be time consuming. As a result, some practitioners might have an incentive to prefer "fast and frugal" methods to clean but more costly methods. In this article, we focus on a tractable procedure initially proposed by Holt and Laury (2002) to elicit risk attitude. We generalize this method to measure utility and risk aversion as follows. First, we allow measurement of probabilistic risk attitude through violations of expected utility due to probability weighting. Second, we use the outcome scale rather than the probability scale in the menu of choices. Third, we compare sure payoffs with lotteries instead of comparing non-degenerate lotteries. A within-subject experimental study illustrates the gains in tractability and bias minimization that can result from such an extension.
70 citations
TL;DR: In a controlled laboratory experiment as mentioned in this paper, subjects had to fold letters in order to earn money, and the gross income varied and the tax rate was 0, 25, and 50 percent.
Abstract: In a controlled laboratory experiment, subjects had to fold letters in order to earn money. While the net income per letter was the same in the three treatments, the gross income varied and the tax rate was 0, 25, and 50 percent. Although work incentives should be the same in all treatments, subjects worked harder and longer when they were taxed. We conclude that this is because of a net wage illusion effect. The existence of this effect demonstrates that not only are the tax rate and the tax base of importance for work incentives, but the perception of a tax is also important.
41 citations
TL;DR: The authors investigated a new way to decompose the gender wage gap with the introduction of individual risk attitudes using representative Korean data and found that female workers are more risk averse than male workers and hence prefer working in the public sector, where wages are generally lower than in the private sector.
Abstract: This paper investigates a new way to decompose the gender wage gap with the introduction of individual risk attitudes using representative Korean data. We esti- mate the wage gap with correction for the selection bias, which latter results in the overestimation of this wage gap. Female workers are more risk averse. They hence prefer working in the public sector, where wages are generally lower than in the pri- vate sector. Therefore, our observation of the gender wage dierential based on the normal Mincerian wage equation is overestimated. Our (corrected) wage dierential is signicantly reduced (by from 3% to 8% points) by applying the Switching Re- gression Model and Lee's polychotomous selection correction. Self-selection based on risk attitudes therefore explains, in part, what is popularly perceived as gender discrimination.
10 citations
Posted Content•
TL;DR: In this article, the authors examined the relations between the terms of the efficiency wage contract offered by a firm and the responses of a worker, under incomplete information about the degree of risk aversion of the firm and worker.
Abstract: The efficiency wage model of Shapiro and Stiglitz (American Economic Review 74: 433–444, 1984) has not always been confirmed by empirical investigations. This could be due to informational problems. Reformulating the Shapiro and Stiglitz model as a sequential game, this paper examines the relations between the terms of the efficiency wage contract offered by a firm and the responses of a worker, under incomplete information about the degree of risk aversion of the firm and the worker. It shows that under incomplete information about the degree of risk aversion of the worker, shirking can emerge as an equilibrium phenomenon. For any efficiency wage contract, a worker will shirk if the degree of risk aversion of the worker is less than that corresponding to the contract.
5 citations
Dissertation•
08 Dec 2016
TL;DR: In this paper, the authors explored the impact of the use of Information and Communication Technologies (ICT) on employees' behaviors and found that IT monitoring is quite successful at reducing those costs.
Abstract: This dissertation explores the impact of the use of Information and Communication Technologies (ICT) on employees’ behaviors. While the neoclassical growth theory considers ICT as an input used in the production process, we relied on a literature in the organizational economic field which states that technologies have two different key aspects. Information technologies push down the decision making at the employee level while Communication technologies centralize the decision making. We addressed the issue of the more efficient technologies for workers’ performance, the costs generated by using the most efficient type of technologies and how the technology-based monitoring may be useful to reduce those costs. We used the experimental methodology since the collection of individuals and team's production is hard with survey data. Our results show that employees prefer information technologies and those who use it are more productive than others. We also show that work organization and technologies which push down the decision making at the employee level could entail some substantial costs for the firm. Indeed, employees are more willing to engage on time wasting activities in order to influence the principal’s decision when they can participate to the decision making process. However IT monitoring is quite successful at reducing those costs. Technology monitoring implies a disciplining effect at the beginning when the sanction is available but this effect lessens over time. Our results show that employees are more productive when they spend more time on internet. Giving constant heightened feedbacks provided by ICT to employees about their productivity should be the better way to sensitize them about the extent of technology monitoring in order to increase their performance.
References
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TL;DR: The authors argue that the separation of decision and risk-bearing functions observed in large corporations is common to other organizations such as large professional partnerships, financial mutuals, and nonprofits. But they do not consider the role of decision agents in these organizations.
Abstract: ABSENT fiat, the form of organization that survives in an activity is the one that delivers the product demanded by customers at the lowest price while covering costs.1 Our goal is to explain the survival of organizations characterized by separation of "ownership" and "control"-a problem that has bothered students of corporations from Adam Smith to Berle and Means and Jensen and Meckling.2 In more precise language, we are concerned with the survival of organizations in which important decision agents do not bear a substantial share of the wealth effects of their decisions. We argue that the separation of decision and risk-bearing functions observed in large corporations is common to other organizations such as large professional partnerships, financial mutuals, and nonprofits. We contend that separation of decision and risk-bearing functions survives in these organizations in part because of the benefits of specialization of
14,045 citations
TL;DR: In fact, some common properties are shared by practically all legislation, and these properties form the subject matter of this essay as discussed by the authors, which is the basis for this essay. But, in spite of such diversity, some commonsense properties are not shared.
Abstract: Since the turn of the twentieth century, legislation in Western countries has expanded rapidly to reverse the brief dominance of laissez faire during the nineteenth century. The state no longer merely protects against violations of person and property through murder, rape, or burglary but also restricts ‘discrimination’ against certain minorities, collusive business arrangements, ‘jaywalking’, travel, the materials used in construction, and thousands of other activities. The activities restricted not only are numerous but also range widely, affecting persons in very different pursuits and of diverse social backgrounds, education levels, ages, races, etc. Moreover, the likelihood that an offender will be discovered and convicted and the nature and extent of punishments differ greatly from person to person and activity to activity. Yet, in spite of such diversity, some common properties are shared by practically all legislation, and these properties form the subject matter of this essay.
9,613 citations
8,910 citations
TL;DR: In this paper, a meta-analysis of 128 studies examined the effects of extrinsic rewards on intrinsic motivation and found that engagement-contingent, completion-contengent, and performance-contagioning rewards significantly undermined free-choice intrinsic motivation, as did all rewards, all tangible rewards and all expected rewards.
Abstract: A meta-analysis of 128 studies examined the effects of extrinsic rewards on intrinsic motivation. As predicted, engagement-contingent, completion-contingent, and performance-contingent rewards significantly undermined free-choice intrinsic motivation (d = -0.40, -0.36, and -0.28, respectively), as did all rewards, all tangible rewards, and all expected rewards. Engagement-contingent and completion-contingent rewards also significantly undermined self-reported interest (d = -0.15, and -0.17), as did all tangible rewards and all expected rewards. Positive feedback enhanced both free-choice behavior (d = 0.33) and self-reported interest (d = 0.31). Tangible rewards tended to be more detrimental for children than college students, and verbal rewards tended to be less enhancing for children than college students. The authors review 4 previous meta-analyses of this literature and detail how this study's methods, analyses, and results differed from the previous ones.
5,604 citations
01 Jan 2008
TL;DR: A meta-analysis of 128 studies examined the effects of extrinsic rewards on intrinsic motivation, finding that Tangible rewards tended to be more detrimental for children than college students, and verbal rewards tend to be less enhancing for children compared with college students.
5,536 citations