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

David Dickinson and Marie Claire Villeval

No 1222, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 realtask 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: C92 J24 M5 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2004-07
New Economics Papers: this item is included in nep-exp and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published - revised version published in: Games and Economic Behavior, 2008, 63 (1), 56-76.

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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 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)
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