Signaling and Screening of Workers' Motivation

CESifo Working Paper Series No. 1099; Tinbergen Institute Working Paper No. 2002-050/3

31 Pages Posted: 2 Feb 2004

See all articles by Josse Delfgaauw

Josse Delfgaauw

Erasmus University Rotterdam (EUR) - Department of Economics; Tinbergen Institute

Robert Dur

Erasmus University Rotterdam (EUR) - Department of Economics; Tinbergen Institute; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: December 2003

Abstract

This paper develops a model in which workers to a certain extent enjoy working. We examine the implications of workers' intrinsic motivation for optimal monetary incentive schemes. We show that motivated workers work harder and, for a given level of effort, are willing to work for a lower wage. When people differ in their motivation to work at a particular firm, the profits of the firm depend on its capability to attract and select highly motivated workers. We show that when the firm has all the bargaining power and workers face application cost, the firm needs to commit to a minimum wage offer in order to attract workers. A higher minimum wage increases the probability to fill the vacancy, but decreases the expected average quality of job applicants, as it induces lower motivated workers to apply. The optimal level of the minimum wage depends on whether or not the firm can observe the motivation of the applicants. If applicants can credibly signal their motivation, a minimum wage not only helps to attract workers, but also to select the best-motivated worker among the job applicants.

Keywords: signaling and screening models, intrinsic motivation, monetary incentive schemes, minimum wages

JEL Classification: D82, J31, J42, M51, M52

Suggested Citation

Delfgaauw, Josse and Dur, Robert, Signaling and Screening of Workers' Motivation (December 2003). CESifo Working Paper Series No. 1099; Tinbergen Institute Working Paper No. 2002-050/3. Available at SSRN: https://ssrn.com/abstract=315008

Josse Delfgaauw (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Economics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Robert Dur

Erasmus University Rotterdam (EUR) - Department of Economics ( email )

FEW / H 8-15
P.O. Box 1738
Rotterdam, 3000 DR
Netherlands
+31-10-4082159 (Phone)
+31-10-4089161 (Fax)

HOME PAGE: http://people.few.eur.nl/dur

Tinbergen Institute

Amsterdam/Rotterdam
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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