Shirking, Standards and the Probability of Detection

John Sessions () and John D. Skåtun ()
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John D. Skåtun: University of Aberdeen

No 8863, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: By relaxing the common efficiency wage assumption of exogenous shirking detection probabilities, we demonstrate how standards and efficiency wages are related. In a more general setting where the probability of detection depends upon the equilibrium effort level of non-shirkers, we show that the uniformly positive (negative) supply-side relationship between wages (unemployment insurance) and effort is no longer guaranteed. Profit maximization on the part of the firm, however, ensures that effort will depend positively (negatively) on wages (unemployment insurance) in equilibrium.

Keywords: efficiency wages; standards; monitoring (search for similar items in EconPapers)
JEL-codes: J33 J41 J54 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2015-02
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Published - published in: Bulletin of Economic Research, 2018, 70 (2), 103-118

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