Incentives Beyond the Money: Identity and Motivational Capital in Public Organizations

Mikel Berdud (mberdud@ohe.org), Juan M. Cabasés (jmcabases@unavarra.es) and Jorge Nieto (jnieto@unavarra.es)
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Juan M. Cabasés: Departamento de Economía-UPNA, https://www.unavarra.es/departamento-economia
Jorge Nieto: Departamento de Economía-UPNA, https://www.unavarra.es/departamento-economia

Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra from Departamento de Economía - Universidad Pública de Navarra

Abstract: This paper explores optimality of contracts and incentives when the principal (public organisation) can undertake investments to change agents’ (public workers) identity. In the model, workers within the organisation can have different identities. We develop a principal-agent dynamical model with moral hazard, which captures the possibility of affecting this workers’ identity through contracts offered by the firm. In the model, identity is a motivation source which reduces agents’ isutility from effort. We use the term identity to refer to a situation in which the worker shares the organisational objectives and views herself as a part of the organisation. Contrary, we use the term conflict to refer to a ituation in which workers behave self-interested and frequently in the opposite way of the organisation. We assume that identity can be achieved when principal include mission-sense developing investments in contracts. By mission we mean a single culture that is shared by all the members of an organization. We discuss the conditions under which spending resources in changing workers’ identity and invest in this kind of motivational capital is optimal for organisations. Our results may help to inform public firms’ managers about the optimal design of incentive schemes and policies. For instance, we conclude that investing in motivational capital is the best option in the long run whereas pure monetary incentives works better in the short run.

Keywords: contracts; moral hazard; identity; socialization; mission; motivational capital. (search for similar items in EconPapers)
JEL-codes: D03 D86 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cta, nep-hrm and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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