This dissertation extends the typical shirking model of efficiency wages to a continuum of effort levels. The generalisation totally overturns earlier intuitions. Specifically, the characteristic feature of the earlier theory that monitoring and pay are substitute tools for inspiring workers, no more exists. This really is outstanding, because this type of negative correlation has been utilized as the primary empirical test for the presence of efficiency wages. With a continuum of effort levels, the efficiency wage model can also more conveniently be compared with conventional linear incentive wages. The most frequently recurring objection against the efficiency wage model…
Contents
Preface
1 Introduction and Summary
Introduction
Summary of the essays
Introduction
Model
Discrete effort levels
Continuous effort levels
Main results
Welfare implications
Other sources of variation
Empirical implications
The measurement of monitoring
Minimum monitoring restrictions
Direct measures of monitoring
Final remarks
3 Monitoring and Pay: General Results
Introduction.
Model .
Analysis
Method
Main results
Binding individual rationality constraint
Mixed strategies
The suboptimality of linear incentive schemes
Concluding remarks
4 Limited Liability and Dynamic Incentives
Introduction
Model
Determination of the optimal contract
The correlation between monitoring and pay
Welfare implications
Implicit bonding contracts
Firm-specific human capital investments
Extensions and further research
Firm commitment, or explicit bonding contracts
Savings
Concluding remarks
5 Do Market-Based Incentives Lower the
Compliance?
Introduction
The Model
Command and con~rol policy
Comparative statics
Welfare implications
Emission-fee policy….
Author: Allgulin, Magnus
Source: Stockholm School of Economics
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