Crowding out effect and sorting in competitive labor markets with motivated workers

Antoni Cunyat ()

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We consider a competitive labor market with moral hazard and adverse selection where firms employ teams of two workers. There exist two types of workers: selfish workers and motivated workers. Selfish workers only respond to monetary incentives. Motivated workers not only respond to monetary incentives but their behavior is also driven by intrinsic motivation. However, if a firm chooses an output-based reward system, their intrinsic motivation is undermined. We obtain that self-selection into contracts separating workers based on their motivation is feasible, provided that the crowding out e¿ect is powerful enough. More importantly, all firms have expected positive profits. Our model produces in this case heterogeneity at the firm level.

Keywords: intrinsic motivation; adverse selection; competition (search for similar items in EconPapers)
JEL-codes: D82 D86 J33 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2016-11
New Economics Papers: this item is included in nep-bec, nep-cta and nep-hrm
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2016-06

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