Motivational Capital and Incentives in Health Care Organizations

Mikel Berdud (), Juan M. Cabasés Hita () and Jorge Nieto ()
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Juan M. Cabasés Hita: Departamento de Economía-UPNA
Jorge Nieto: Departamento de Economía-UPNA

Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra from Departamento de Economía - Universidad Pública de Navarra

Abstract: This paper explores optimality of contracts and incentives when the principal (public organization) can undertake investments to change agents’ (public workers) identity. In the model, workers within the organization can have different identities. We develop a principal-agent dynamical model with moral hazard, which captures the possibility of affecting this workers’ identity through contracts offered by the firm. In the model, identity is a motivation source which reduces agents’ disutility from effort. We use the term identity to refer to a situation in which the worker shares the organizational objectives and views herself as a part of the organization. Contrary, we use the term conflict to refer to a situation in which workers behave self-interested and frequently in the opposite way of the organisation. We assume that the principal can include investments to foster identity in contracts. Think for instance in developing a single culture that is shared by all the members of an organization. We discuss the conditions under which spending resources in changing workers’ identity and invest in this kind of motivational capital is optimal for organizations. Our results may help to inform public firms’ managers about the optimal design of incentive schemes and policies. Forinstance, we conclude that investing in motivational capital is the best option in the long run whereas pure monetary incentives works better in the short run.

Keywords: contracts; moral hazard; identity; socialization; mission; motivational capital. (search for similar items in EconPapers)
JEL-codes: D03 D86 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Motivational Capital and Incentives in Health Care Organizations (2014)
Working Paper: Motivational Capital and Incentives in Health Care Organisations (2012)
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