Working Paper: NBER ID: w8811
Authors: Daniel Nagin; James Rebitzer; Seth Sanders; Lowell Taylor
Abstract: Economic models of incentives in employment relationships are based on a specific theory of motivation. Employees are 'rational cheaters,' who anticipate the consequences of their actions and shirk when the perceived marginal benefit exceeds the marginal cost. Managers respond to this decision calculus by implementing monitoring and incentive pay practices that lessen the attraction of shirking. This 'rational cheater model' is not the only model of opportunistic behavior, and indeed is viewed skeptically by human resource practitioners and by many non-economists who study employment relationships. We investigate the 'rational cheater model' using data from a double-blind field experiment that allows us to observe the effect of experimentally-induced variations in monitoring on employee opportunism. The experiment is unique in that it occurs in the context of an ongoing employment relationship, i.e., with the firm's employees producing output as usual under the supervision of their front-line managers. The results indicate that a significant fraction of employees behave roughly in ccordance with the 'rational cheater model.' We also find, however, that a substantial proportion of employees do not respond to manipulations in the monitoring rate. This heterogeneity is related to employee assessments about their general treatment by the emp loyer.
Keywords: opportunistic behavior; incentives; monitoring; field experiment
JEL Codes: D2; J2; L2; L8; M12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| good outside options do not increase shirking more than other workers when monitoring declines (J29) | no differential response to reduced monitoring (C90) |
| monitoring (E63) | employee behavior (M51) |
| monitoring levels (E01) | employee attitudes (M54) |
| reduced monitoring (E63) | increased shirking (H31) |