Tenure, wage profiles and monitoring

John G. Sessions, Nikolaos Theodoropoulos

Research output: Contribution to journalArticle

2 Citations (SciVal)


Efficiency wage theory predicts that firms can induce worker effort by the carrot of high wages and/or the stick of monitoring worker performance. Another option available to firms is to tilt the remuneration package over time such that the lure of high future earnings acts as a deterrent to current shirking. On the assumption that firms strive for the optimal trade-off between these various instruments, we develop a two-period model of efficiency wages in which increased monitoring attenuates the gradient of the wage-tenure profile. Our empirical analysis, using two cross sections of matched employer-employee British data, provides robust support for this prediction.
Original languageEnglish
Pages (from-to)105-162
Number of pages58
JournalResearch in Labor Economics
Publication statusPublished - 2013


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