Extrinsic Rewards and Intrinsic Motives: Standard and Behavioral Approaches to Agency and Labor Markets

Bard College Levy Economics Institute Working Paper No. 607

101 Pages Posted: 16 Aug 2010

See all articles by James B. Rebitzer

James B. Rebitzer

Boston University School of Management; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics; Bard College - The Levy Economics Institute

Lowell J. Taylor

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

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Date Written: August 16, 2010

Abstract

Employers structure pay and employment relationships to mitigate agency problems. A large literature in economics documents how the resolution of these problems shapes personnel policies and labor markets. For the most part, the study of agency in employment relationships relies on highly stylized assumptions regarding human motivation, e.g., that employees seek to earn as much money as possible with minimal effort. In this essay, we explore the consequences of introducing behavioral complexity and realism into models of agency within organizations. Specifically, we assess the insights gained by allowing employees to be guided by such motivations as the desire to compare favorably to others, the aspiration to contribute to intrinsically worthwhile goals, and the inclination to reciprocate generosity or exact retribution for perceived wrongs. More provocatively, from the standpoint of standard economics, we also consider the possibility that people are driven, in ways that may be opaque even to themselves, by the desire to earn social esteem or to shape and reinforce identity.

Keywords: Agency, Motivation, Employment Relationships, Behavioral Economics

JEL Classification: D2, J0, M5

Suggested Citation

Rebitzer, James B. and Taylor, Lowell J., Extrinsic Rewards and Intrinsic Motives: Standard and Behavioral Approaches to Agency and Labor Markets (August 16, 2010). Bard College Levy Economics Institute Working Paper No. 607. Available at SSRN: https://ssrn.com/abstract=1659700 or http://dx.doi.org/10.2139/ssrn.1659700

James B. Rebitzer (Contact Author)

Boston University School of Management ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States
617 353 4605 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Bard College - The Levy Economics Institute

Blithewood
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Lowell J. Taylor

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States
412-268-3278 (Phone)
412-268-7036 (Fax)

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