Working Paper: CEPR ID: DP15498
Authors: Francesco Amodio; Miguel Martinez-Carrasco
Abstract: This paper studies learning within organizations when incentives change. We use a simple principal-agent model to show how, in the presence of imperfect information over the shape of the production function, workers' effort choice changes over time as information is disclosed and processed. We also show that changing incentives can trigger this learning process. We test this prediction using personnel data from an egg production plant in Peru. Exploiting a sudden change in the contract parameters, we find that workers learn from each other over the shape of the production function. This adjustment process is costly for the firm.
Keywords: organizational learning; workplace incentives; inputs
JEL Codes: D22; D24; J24; J33; M11; M52; M54; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Change in contract parameters (D86) | Workers adjust effort towards peers' higher output (D29) |
| Workers adjust effort towards peers' higher output (D29) | Learning process occurs (C45) |
| Learning process occurs (C45) | Changes in effort choices over time (J29) |
| Changes in effort choices over time (J29) | Significant decrease in food distributed by workers (I38) |
| Learning process occurs (C45) | Reduction in profits due to costs of learning (D29) |