Empirical support for asymmetry of the distribution of effort

David Dickinson

No 2000-05, Working Papers from Utah State University, Department of Economics

Abstract: When employers observe imperfect measures of worker effort, theorists typically assume that the observation of effort is unimodal and symmetrically distributed. This paper presents empirical evidence from two experimental work environments that question the assumption of symmetric distributions of observed effort. For these piece-rate work environments we find that observed effort is significantly negatively skewed (i.e., modal > mean effort). Two possible explanations are intra-period learning and/or on-the-job leisure. There are both theoretical and practical implications of this asymmetry. Some implications that are discussed, include: self-selection into rank-order tournaments, optimal wage spreads in rank-order tournaments, and optimal wage contracts with asymmetric information.

Pages: 33 pages
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