Workplace Surveillance, Privacy Protection, and Efficiency Wages

17 Pages Posted: 21 Apr 2004

See all articles by Patrick W. Schmitz

Patrick W. Schmitz

University of Cologne; Centre for Economic Policy Research (CEPR)

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Abstract

Consider an employer who wants her employee to work hard. As is well known from the efficiency wage literature, the employer must pay the (wealth-constrained) employee a positive rent to provide incentives for exerting unobservable effort. Alternatively, the employer could make effort observable by costly workplace surveillance. It is argued that a privacy protection law preventing surveillance may increase the total surplus. While such a law reduces the employer's profit, this loss can be overcompensated by the employee's gain, because the employer invests in surveillance not only to implement higher effort, but also to reduce the employee's rent.

Keywords: Privacy protection laws, workplace surveillance, moral hazard

JEL Classification: K31, J83

Suggested Citation

Schmitz, Patrick W., Workplace Surveillance, Privacy Protection, and Efficiency Wages. Available at SSRN: https://ssrn.com/abstract=533642 or http://dx.doi.org/10.2139/ssrn.533642

Patrick W. Schmitz (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

HOME PAGE: http://schmitz.uni-koeln.de/index.php?s=mitarbeiter&t=schmitz

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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