Competition and Screening with Skilled and Motivated Workers

Francesca Barigozzi and N. Burani

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: We study optimal contracts offered by two firms competing for the exclusive services of one worker, who is privately informed about her ability and her motivation. Firms differ both in their production technology and in the mission they pursue and a motivated worker is keen to be hired by the missionoriented firm. We find that the matching of worker types to firms is always Pareto-efficient. When the difference in firms technology is high, only the most efficient firm is active. When the difference is not very high, then agent types sort themselves by motivation: the mission-oriented firm hires motivated types and the profit-oriented firm employs non-motivated ones, independently of ability. Effort provision is higher when the worker is hired by the mission-oriented firm, but a compensating wage differential might exist: the motivated worker is paid less by the mission-oriented firm. Such an earnings penalty is driven entirely by motivation, is increasing in ability and is associated to low power of incentives.

JEL-codes: D82 D86 J31 M55 (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-bec, nep-cse, nep-cta, nep-hrm, nep-lab, nep-lma and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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