Shirking, standards and the probability of detection

John G. Sessions, John D. Skåtun

Research output: Contribution to journalArticle

Abstract

By relaxing the common efficiency wage assumption of exogenous shirking detection probabilities, we demonstrate how standards and efficiency wages are related. In a more general setting where the probability of detection depends upon the equilibrium effort level of non-shirkers, we show that the uniformly positive (negative) supply-side relationship between wages (unemployment insurance) and effort is no longer guaranteed. Profit maximization on the part of the firm, however, ensures that effort will depend positively (negatively) on wages (unemployment insurance) in equilibrium.

Original language English 16 Bulletin of Economic Research 22 Sep 2017 https://doi.org/10.1111/boer.12143 E-pub ahead of print - 22 Sep 2017

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Unemployment insurance
Wages
Efficiency wages
Shirking
Probability of detection
Profit maximization
Supply side

Keywords

• Efficiency wages
• J33
• J41
• J54
• Monitoring
• Standards

ASJC Scopus subject areas

• Economics and Econometrics

Cite this

Shirking, standards and the probability of detection. / Sessions, John G.; Skåtun, John D.

In: Bulletin of Economic Research, 22.09.2017.

Research output: Contribution to journalArticle

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