Competition and Screening with Skilled and Motivated Workers

Quaderni - Working Paper DSE N° 953

43 Pages Posted: 10 Jul 2014 Last revised: 12 Sep 2014

See all articles by Francesca Barigozzi

Francesca Barigozzi

University of Bologna - Department of Economics

Nadia Burani

University of Bologna - School of Economics, Management, and Statistics

Date Written: June 30, 2014

Abstract

We study optimal contracts offered by two firms competing for the exclusive services of one worker, who is privately informed about her ability and her motivation. Firms differ both in their production technology and in the mission they pursue and a motivated worker is keen to be hired by the missionoriented firm. We find that the matching of worker types to firms is always Pareto-efficient. When the difference in firms’ technology is high, only the most efficient firm is active. When the difference is not very high, then agent types sort themselves by motivation: the mission-oriented firm hires motivated types and the profit-oriented firm employs non-motivated ones, independently of ability. Effort provision is higher when the worker is hired by the mission-oriented firm, but a compensating wage differential might exist: the motivated worker is paid less by the mission-oriented firm. Such an earnings penalty is driven entirely by motivation, is increasing in ability and is associated to low power of incentives.

Keywords: vocational labor market, multi-principals, bidimensional screening, intrinsic motivation, skills

JEL Classification: D82, D86, J31, M55

Suggested Citation

Barigozzi, Francesca and Burani, Nadia, Competition and Screening with Skilled and Motivated Workers (June 30, 2014). Quaderni - Working Paper DSE N° 953, Available at SSRN: https://ssrn.com/abstract=2464002 or http://dx.doi.org/10.2139/ssrn.2464002

Francesca Barigozzi (Contact Author)

University of Bologna - Department of Economics ( email )

P.zza Scaravilli 2
40126 Bologna, 40126
Italy

Nadia Burani

University of Bologna - School of Economics, Management, and Statistics ( email )

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