Shirking, Standards and the Probability of Detection

16 Pages Posted: 13 Apr 2018

See all articles by John G. Sessions

John G. Sessions

University of Bath; IZA Institute of Labor Economics

John D. Skåtun

University of Aberdeen - Business School

Multiple version iconThere are 2 versions of this paper

Date Written: April 2018

Abstract

By relaxing the common efficiency wage assumption of exogenous shirking detection probabilities, we demonstrate how standards and efficiency wages are related. In a more general setting where the probability of detection depends upon the equilibrium effort level of non‐shirkers, we show that the uniformly positive (negative) supply‐side relationship between wages (unemployment insurance) and effort is no longer guaranteed. Profit maximization on the part of the firm, however, ensures that effort will depend positively (negatively) on wages (unemployment insurance) in equilibrium.

Keywords: efficiency wages, monitoring, standards

JEL Classification: J33, J41, J54

Suggested Citation

Sessions, John G. and Skåtun, John D., Shirking, Standards and the Probability of Detection (April 2018). Bulletin of Economic Research, Vol. 70, Issue 2, pp. 103-118, 2018, Available at SSRN: https://ssrn.com/abstract=3161080 or http://dx.doi.org/10.1111/boer.12143

John G. Sessions (Contact Author)

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

IZA Institute of Labor Economics

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

John D. Skåtun

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

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