series: TI 02-050/3
Signaling and Screening of Workers' Motivation
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This paper develops a model in which workers to a certain extent like to exert effort at the workplace. We examine the implications of workers' motivation for optimal monetary incentive schemes. We show that in the optimum motivated workers work harder and are willing to work for a lower wage. In addition, we examine whether job seekers have an incentive to be truthful about their motivation in a job interview. When the firm has sufficient bargaining power, workers hide their motivation so as to increase the firm's wage offer. As a result, an inefficient allocation of workers over firms may arise. We show that a commitment to a minimum wage may help to restore allocational efficiency and may be in the interest of the firm.
- J42 : Monopsony; Segmented Labor Markets
- J31 : Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
- D82 : Asymmetric and Private Information
- wage scheme
- wage oer
- worker type
- incentive schemes