Do Job Candidates’ Effort Promises Matter When the Labor Market is Competitive? Experimental Evidence

Posted: 19 Aug 2013 Last revised: 22 Aug 2018

See all articles by Markus C. Arnold

Markus C. Arnold

University of Bern - Institute for Accounting

Robert Grasser

University of South Carolina

Date Written: February 27, 2017

Abstract

The study investigates whether noncontractible effort promises made by job candidates in a competitive hiring situation increase their actual effort in the work relationship. Promise-keeping preferences generally suggest that such promises have a positive effect on hired workers’ effort beyond the contractible level. That means, individuals commit to promises even if they are costly to keep. However, promises made under labor market competition might be made for the strategic reason of being selected from the candidate pool, so that hired workers may keep less of their promises. Contrary to this intuition, we develop theory that the presence of effort promises increases worker effort even more when job candidates face competition in the labor market. We test this theory in a setting in which employers can offer a range of contract terms including a pure fixed wage as well as outcome-based compensation. The results of our experiment support our predictions. Workers promise higher effort levels when competing for a job than when they do not compete. Moreover, even though fulfillment costs increase with the size of the promise, workers hired from a competitive market do not show less commitment to their promises than workers hired from a noncompetitive market, thereby increasing the total effort provided. The results of our study contribute to both theory and practice by enhancing our understanding of the effects of worker-employer communication during hiring, particularly in a competitive situation in which such communication is most likely to exist.

Keywords: principal-agent theory, incentive contracts, competition, effort announcements, promise-keeping, reciprocity

Suggested Citation

Arnold, Markus C. and Grasser, Robert, Do Job Candidates’ Effort Promises Matter When the Labor Market is Competitive? Experimental Evidence (February 27, 2017). AAA 2014 Management Accounting Section (MAS) Meeting Paper. Available at SSRN: https://ssrn.com/abstract=2312021 or http://dx.doi.org/10.2139/ssrn.2312021

Markus C. Arnold (Contact Author)

University of Bern - Institute for Accounting ( email )

Engehaldenstr. 4
Bern, 3012
Switzerland

Robert Grasser

University of South Carolina

1014 Greene St
Columbia, SC 29208
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
474
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information