Estimating the Shirking Model With Variable Effort'
CORE Discussion Paper No. 2003/75
19 Pages Posted: 31 May 2007
Date Written: October 2003
We show in a theoretical efficiency wage model where firms differ in monitoring intensity or in the effort intensity of their technologies that the impact of monitoring intensity on wages is ambiguous, a result that mirrors evidence from the empirical literature. We argue that to correctly specify the impact of monitoring on wages, the interaction between monitoring and effort needs to be modelled. Results using a worker, firm panel from Ghana which contains reasonable effort and monitoring proxies show that the return to effort is higher in poorly monitored sectors as the theory suggests.
Keywords: Efficiency wages, effort, monitoring intensity
JEL Classification: J30
Suggested Citation: Suggested Citation