Envy in Mission-Oriented Organizations

UBEconomics Working Papers E17/366

48 Pages Posted: 15 Dec 2017

See all articles by Francesca Barigozzi

Francesca Barigozzi

Università di Bologna

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). UBEconomics Working Papers E17/366, Available at SSRN: https://ssrn.com/abstract=3087154 or http://dx.doi.org/10.2139/ssrn.3087154

Francesca Barigozzi (Contact Author)

Università di Bologna ( email )

Via Zamboni, 33
Bologna, 40126
Italy

Ester Manna

University of Barcelona ( email )

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

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