Envy in Mission-Oriented Organizations

Quaderni - Working Paper DSE N° 1108

49 Pages Posted: 4 Oct 2017

See all articles by Francesca Barigozzi

Francesca Barigozzi

University of Bologna - Department of Economics

Ester Manna

University of Barcelona

Date Written: October 3, 2017

Abstract

According to the labor donation theory, workers adhering to their firms' mission are willing to donate a portion of their paid labor. In this paper, we study how workers' fairness concerns limit the firm's ability to extract labor donation from its employees. We find that, in sectors where the firm's mission is important, optimal contracts are such that high-ability employees perceive their wage as less fair than low-ability employees and they must be rewarded with an “envy rent". The opposite is true in sectors where the firm's mission does not play a relevant role. We empirically test the predictions of the model using the German Socio-Economic Panel finding support for our theoretical results.

Keywords: Mission-oriented organizations, envy, labor donations, screening

JEL Classification: D03, D82, M54

Suggested Citation

Barigozzi, Francesca and Manna, Ester, Envy in Mission-Oriented Organizations (October 3, 2017). Quaderni - Working Paper DSE N° 1108, Available at SSRN: https://ssrn.com/abstract=3047215 or http://dx.doi.org/10.2139/ssrn.3047215

Francesca Barigozzi (Contact Author)

University of Bologna - Department of Economics ( email )

P.zza Scaravilli 2
40126 Bologna, 40126
Italy

Ester Manna

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

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