A microeconomic model of worker motivation based on monetary and non-monetary incentives

Martin Petrick

No 175, IAMO Discussion Papers from Leibniz Institute of Agricultural Development in Transition Economies (IAMO)

Abstract: By focusing on direct monetary incentives, the traditional literature on motivating workers predicts that high-effort outcomes are unlikely unless workers become residual claimants of profit. However, real world employment contracts typically display a low incidence of profit sharing. In this paper, I extend the canonical model of a revenue sharing contract by integrating two more options for incentivising workers. The literature to date has discussed these strategies in isolation from each other. First, I assume that workers derive utility from following a work norm. The manager can influence workers' identification with a high-effort work norm at a cost. Second, workers risk being fired if they are observed shirking. Depending on the rigidity of their employment contract, this threat of termination induces them to increase effort. Key drivers of the optimal employment contract are then the variance of output, the costs of inducing worker's identification with high-effort norms and the rigidity of the labour market.

Date: 2018
New Economics Papers: this item is included in nep-cta and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/180379/1/1026164834.pdf (application/pdf)

Related works:
Working Paper: A microeconomic model of worker motivation based on monetary and non-monetary incentives (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:iamodp:175

Access Statistics for this paper

More papers in IAMO Discussion Papers from Leibniz Institute of Agricultural Development in Transition Economies (IAMO) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().