Does Monitoring Decrease Work Effort ? The Complementarity Between Agency and Crowding-Out Theories

Marie Claire Villeval and David Dickinson

No 409, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: Agency theory assumes that tighter monitoring by the principal should motivate the agent to raise his effort level whereas the “crowding-out” literature suggests that it may reduce the overall work effort. These two assertions are not necessarily contradictory provided that the nature of the employment relationship is taken into account (Frey, 1993). Based upon a real-task laboratory experiment, our results show that principals are not trustful enough to refrain from monitoring the agents, and most of the agents react to the disciplining effect of monitoring. However we find also some evidence that intrinsic motivation is crowded out when monitoring is above a certain threshold. We identify that both interpersonal principal/agent links and concerns for the distribution of output payoff are important for the emergence of this crowding out effect.

Keywords: Principal-agent theory; Monitoring; Crowding-out; Motivation; Real effort experiment (search for similar items in EconPapers)
JEL-codes: C81 C91 J31 J33 M52 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2004-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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ftp://ftp.gate.cnrs.fr/RePEc/2004/0409.pdf (application/pdf)

Related works:
Journal Article: Does monitoring decrease work effort?: The complementarity between agency and crowding-out theories (2008)
Working Paper: Does Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories (2005)
Working Paper: Does Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories (2004)
Working Paper: Does Monitoring Decrease Work Effort? The Complementary between Agency and Crowding-Out Theories (2004)
Working Paper: Does Monitoring Decrease Work Effort ? The Complementarity Between Agency and Crowding-Out Theorie (2004)
Working Paper: Does Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories (2004)
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