Work Norms and Involuntary Unemployment

Hajime Miyazaki

The Quarterly Journal of Economics, 1984, vol. 99, issue 2, 297-311

Abstract: Consider the organizational environment of labor management wherein the firm can measure the average performance (i.e., group work norm) of its employees but has difficulty in observing the individual worker's performance within the group. Accordingly, the worker's remuneration is based on the observed group norm. Because of the way in which workers interact among themselves in setting work norms, there results an undersupply of effort from a given workforce size. Furthermore, the group work norm is shown to be negatively correlated with the size of the workforce. Consequently, short-run unemployment can arise with involuntary features. The paper also explores the effectiveness of alternative remuneration schemes in mitigating the inefficiency associated with the group work norm setting.

Date: 1984
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