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Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories

ASU Author/Contributor (non-ASU co-authors, if there are any, appear on document)
David L. Dickinson Ph.D., Professor (Creator)
Institution
Appalachian State University (ASU )
Web Site: http://www.library.appstate.edu/

Abstract: Agency theory assumes that tighter monitoring by the principal should motivate agents to increase their effort, whereas the “crowding-out” literature suggests that the opposite may occur. These two assertions are not necessarily contradictory provided that the nature of the employment relationship is taken into account (Frey 1993). Results from controlled laboratory experiments show that many principals engage in costly monitoring, and most agents react to the disciplining effect of monitoring by increasing effort. However, we also find some evidence that effort is crowded out when monitoring is above a certain threshold. We identify that both interpersonal principal/agent links and concerns for the distribution of output payoff are important for the emergence of this crowding-out effect.

Additional Information

Publication
Dickinson, David L., and Marie-Claire Villeval (2008) “Does Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories.” Games and Economic Behavior, 63(1): 56-76. (ISSN: 0899-8256) Published by Elsevier. doi:10.1016/j.geb.2007.08.004
Language: English
Date: 2008
Keywords
Principal-agent theory, Monitoring, Crowding-out, Motivation, Real effort experiment