Does Monitoring Decrease Work Effort? The Complementarity between Agency and Crowding-Out Theorie
David L. Dickinson
Appalachian State University
National Center for Scientific Research (CNRS) - Institute of Economic Theory and Analysis (GATE); Institute for the Study of Labor (IZA)
July 19, 2004
GATE Working Paper No. 04-09
Agency theory assumes that tighter monitoring by the principal should motivate the agent to raise his effort level whereas the "crowding-out" literature suggests that it may reduce the overall work effort. These two assertions are not necessarily contradictory provided that the nature of the employment relationship is taken into account (Frey, 1993). Based upon a real-task laboratory experiment, our results show that principals are not trustful enough to refrain from monitoring the agents, and most of the agents react to the disciplining effect of monitoring. However we find also some evidence that intrinsic motivation 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.
Number of Pages in PDF File: 43
Keywords: crowding-out, monitoring, motivation, principal-agent theory, real effort experiments
JEL Classification: C92, J24, M5working papers series
Date posted: June 12, 2006 ; Last revised: May 10, 2010
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