Motivation Versus Human Capital Investment in an Agency Problem

49 Pages Posted: 16 Jan 2018

See all articles by Anthony M. Marino

Anthony M. Marino

University of Southern California - Marshall School of Business

Date Written: January 10, 2018

Abstract

This paper considers a firm's optimal investment in training and motivation measures in a hidden action agency problem. We study how these measures interact with each other and the contract in order to create value for the firm. Productivity enhancing training can be firm specific or non-firm specific and firm specific motivation can enhance utility or reduce effort cost. Whether these measures are complements or independents depends on the firm specificity of human capital and whether the participation constraint is binding. We characterize how a tighter labor market affects marginal profitabilities and examine the relative benefits of motivation measures which enhance utility versus those which decrease effort cost.

Keywords: Human Capital, Motivation, Agency

JEL Classification: L20, L21, L22, L23

Suggested Citation

Marino, Anthony M., Motivation Versus Human Capital Investment in an Agency Problem (January 10, 2018). Available at SSRN: https://ssrn.com/abstract=3099848 or http://dx.doi.org/10.2139/ssrn.3099848

Anthony M. Marino (Contact Author)

University of Southern California - Marshall School of Business ( email )

Dept. of Finance & Business Economics
Los Angeles, CA 90089
United States
213-740-6525 (Phone)
213-740-6650 (Fax)

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