Working Paper: CEPR ID: DP10035
Authors: Marina Halac; Andrea Prat
Abstract: We study a dynamic agency problem with two-sided moral hazard: the worker chooses whether to exert effort or shirk; the manager chooses whether to invest in an attention technology to recognize worker performance. In equilibrium the worker uses past recognition to infer managerial attention. An engagement trap arises: absent recent recognition, both worker effort and managerial investment decrease, making a return to high productivity less likely as time passes. In a sample of ex-ante identical firms, firm performance, managerial quality, and worker engagement display heterogeneity across firms, positive correlation, and persistence over time.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased managerial investment in attention technology (D29) | worker engagement (J54) |
| worker engagement (J54) | worker effort (J29) |
| managerial investment in attention technology (G31) | worker effort (J29) |
| lack of recognition (D80) | worker engagement (J54) |
| decrease in worker engagement (J29) | decrease in worker effort (J29) |
| decrease in worker effort (J29) | decline in managerial investment (G31) |
| low managerial investment and low worker effort reinforce each other (L23) | engagement trap (C78) |
| investment in attention technology (O33) | prevent decline in worker engagement (J29) |
| investment in attention technology (O33) | maintain productivity (O49) |
| managerial practices (M54) | firm performance (L25) |