Productivity investment with hidden action

Anthony Marino

Journal of Economic Behavior & Organization, 2021, vol. 190, issue C, 154-163

Abstract: This paper considers a hidden action agency model in which an agent can be incentivized to simultaneously work and exert effort to increase productivity. When such multitasking is optimal, it is implemented through a higher powered contract, unlike the standard multitasking case. We determine conditions under which the principal wants to incentivize concurrent working and productivity investment and conditions under which the agent would want to participate. We show that these conditions are not the same. Multitasking is compared to separated tasks. Our results can help explain the skills gap.

Keywords: Human capital; Investment; Agency (search for similar items in EconPapers)
JEL-codes: L20 L21 L22 L23 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:190:y:2021:i:c:p:154-163

DOI: 10.1016/j.jebo.2021.07.033

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