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Multi-task Principal-Agent Analyses: Incentive Contracts, Asset Ownership and Job Design
Abstract
Introduction In the standard economic treatment of the principal–agent problem, compensation systems serve the dual function of allocating risks and rewarding productive work. A tension between these two functions arises when the agent is risk averse, for providing the agent with effective work incentives often forces him to bear unwanted risk. Existing formal models that have analyzed this tension, however, have produced only limited results. It remains a puzzle for this theory that employment contracts so often specify fixed wages and more generally that incentives within firms appear to be so muted, especially compared to those of the market. Also, the models have remained too intractable to effectively address broader organizational issues such as asset ownership, job design, and allocation of authority. In this article, we will analyze a principal–agent model that (i) can account for paying fixed wages even when good, objective output measures are available and agents are highly responsive to incentive pay; (ii) can make recommendations and predictions about ownership patterns even when contracts can take full account of all observable variables and court enforcement is perfect; (iii) can explain why employment is sometimes superior to independent contracting even when there are no productive advantages to specific physical or human capital and no financial market imperfections to limit the agent's borrowings; (iv) can explain bureaucratic constraints; and (v) can shed light on how tasks get allocated to different jobs.
... Some important works also consider the quality side of the trade-off. Holmstrom and Milgrom (1991) and Baker (1992) lay out seminal principal-agent models that incorporate the multi-dimensional aspects of worker incentives, and explain why incentivizing quantity may cause agents to ignore the quality of their output. However, to the best of our knowledge, an empirical investigation of how workers respond to different quantity-quality incentives is missing from the literature. ...
... Some important works also consider the quality side of the trade-off. Holmstrom and Milgrom (1991) and Baker (1992) lay out seminal principal-agent models that incorporate the multi-dimensional aspects of worker incentives, and explain why incentivizing quantity may cause agents to ignore the quality of their output. However, to the best of our knowledge, an empirical investigation of how workers respond to different quantity-quality incentives is missing from the literature. ...
... The firm hires a worker to produce a certain product (as in our introductory example). If the worker's payment depends only on quantity of units produced, she may choose to put all of her effort in maximizing quantity, while ignoring the quality of the production, as predicted by the theoretical models of Holmstrom and 3 Milgrom (1991) and Baker (1992). On the other hand, if the worker's payment depends mainly on quality of units produced, she may choose to put too much effort in maintaining high quality, while producing low quantity (an example of such a setup would be workers paid mostly on commission from successful endeavors). ...
Firms face an optimization problem that requires a maximal quantity output given a quality constraint. How firms should incentivize quantity and quality to meet these dual goals remains an open question, potentially due to limitations of field data. We provide a theoretical model and conduct an experiment in which participants are paid for both quantity and quality of a real effort task. Consistent with the theoretical predictions, higher quality incentives encourage participants to shift their attention from quantity to quality, and higher quality incentives reduce inefficient decision-making. We also observe behavioral components in responsiveness to the quality incentive.
... Based on the seminal work by Barro (1973), we place officials at the center of the model. Following the ideas of Holmstrom and Milgrom (1991), Dewatripont, Jewitt, and Tirole (2000), and Chen, Li, et al. (2018), we construct a simple multi-task agency model of a representative local official. We show that multi-tasking local officials allocate more efforts to tasks that the upper-level government attaches greater weight to assess their job performance. ...
... Meanwhile, as pollution reduction became a new mandatory task, local officials had to allocate their efforts to different tasks. Based on previous works (Barro 1973;Chen, Li, et al. 2018;Dewatripont, Jewitt, and Tirole 2000;Holmstrom and Milgrom 1991), we develop a simplified framework to capture the behaviors of a representative local official who has a linear utility function and a convex cost function to the official's efforts. Suppose the local official faces three tasks required by upper-level government-promoting economic growth, reducing emissions of targeted pollutants, and reducing emissions of non-targeted pollutants. ...
This paper uses city-planned air pollution reductions under China’s Total Emissions Control (TEC) Policy between the 10th and the 12th Five-Year Plan (FYP) periods (2001−
2015) to estimate the atmospheric effects of target-based environmental regulations. We hypothesize with a multi-task agency model that targeted-based regulation can reduce emissions of targeted air pollution but does not necessarily improve city air quality. Our difference-in-differences framework confirms that the TEC policy reduced the emissions of a targeted air pollutant, Sulfur Dioxide (SO2), but worsened the overall city air quality. We also document that in contrast to the persistent air quality worsening effect, the SO2 emission reduction effect decreased over FYP periods but is greater in late FYP periods and more marketized areas. Moreover, the adverse air quality effect is more pronounced in cities with top leader turnovers and northern cities. These results suggest that target-based environmental regulation shifts emissions from targeted pollutants to non-targeted ones.
... If P gives relatively more weight to task 1, compared to Q, the employee has too strong an incentive to perform task 1 compared to task 2. This is an important intuition about performance measurement and incentive-plan design. An incentive plan's goal is not merely to motivate an employee to work harder, but also to balance motivation across different tasks (Holmstrom & Milgrom 1991). A good measure rewards relatively more for more highly valued tasks, and relatively less for less valued tasks. ...
... Measures with more uncontrollable risk should receive lower incentive intensities, and measure with more controllable risk should receive high incentive intensities. This implies an incentive system combin- 15 ing performance measures with different levels of risk will have imbalanced multitask incentives, or weak overall incentives in order to preserve balanced motivation (Holmstrom & Milgrom 1991 & Rosen 1981; Gibbons & Murphy 1990), in which supervisors evaluate an employee relative to colleagues or some other reference group. This evaluation may be effective if measurement error is common to employees in the group, which relative comparison filters out. ...
A large, mature and robust economic literature on pay for performance now exists, which provides a useful framework for thinking about pay for performance systems. I use the lessons of the literature to discuss how to design and implement pay for performance in practice.
... Thirdly, traditional P-A theory perceives agents as homo economicus and warns against a number of possible perverse behavioural responses ('rent seeking behaviour') to highpowered incentive schemes such as PBF. These are: @BULLET 'gaming': agents take 'actions that increase pay-outs from the incentive contract without improving actual performance' (Baker 1992); @BULLET 'cherry-picking': only patients that make it easier to reach the target are being treated or work in rural and poorer health centres is being refused; @BULLET 'task trade-off': the payment scheme 'direct[s] the allocation of the agents' attention among their various duties'(original emphasis) (Holmström & Milgrom 1991) and among the different aspects of their duties (e.g. between quality and quantity) (Holmström & Milgrom 1991; Langebrunner & Liu 2005); @BULLET 'the blatant manipulation of information': Campbell's law states that 'the more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures' (Campbell 1976); @BULLET 'free riding': this occurs when a team member is trying to take advantage of a team effort without contributing to it (e.g. in the case of targets at the level of the health facility) (Laffont & Martimort 2002; Ostrom et al. 2002), which may lead to reduced motivation among other health workers. On the other hand, posit an alternative view: the best performing team members have an interest in encouraging their peers and monitoring the latter's performance, and thus improving everyone's performance. ...
... Thirdly, traditional P-A theory perceives agents as homo economicus and warns against a number of possible perverse behavioural responses ('rent seeking behaviour') to highpowered incentive schemes such as PBF. These are: @BULLET 'gaming': agents take 'actions that increase pay-outs from the incentive contract without improving actual performance' (Baker 1992); @BULLET 'cherry-picking': only patients that make it easier to reach the target are being treated or work in rural and poorer health centres is being refused; @BULLET 'task trade-off': the payment scheme 'direct[s] the allocation of the agents' attention among their various duties'(original emphasis) (Holmström & Milgrom 1991) and among the different aspects of their duties (e.g. between quality and quantity) (Holmström & Milgrom 1991; Langebrunner & Liu 2005); @BULLET 'the blatant manipulation of information': Campbell's law states that 'the more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures' (Campbell 1976); @BULLET 'free riding': this occurs when a team member is trying to take advantage of a team effort without contributing to it (e.g. in the case of targets at the level of the health facility) (Laffont & Martimort 2002; Ostrom et al. 2002), which may lead to reduced motivation among other health workers. On the other hand, posit an alternative view: the best performing team members have an interest in encouraging their peers and monitoring the latter's performance, and thus improving everyone's performance. ...
... Thirdly, traditional P-A theory perceives agents as homo economicus and warns against a number of possible perverse behavioural responses ('rent seeking behaviour') to highpowered incentive schemes such as PBF. These are: @BULLET 'gaming': agents take 'actions that increase pay-outs from the incentive contract without improving actual performance' (Baker 1992); @BULLET 'cherry-picking': only patients that make it easier to reach the target are being treated or work in rural and poorer health centres is being refused; @BULLET 'task trade-off': the payment scheme 'direct[s] the allocation of the agents' attention among their various duties'(original emphasis) (Holmström & Milgrom 1991) and among the different aspects of their duties (e.g. between quality and quantity) (Holmström & Milgrom 1991; Langebrunner & Liu 2005); @BULLET 'the blatant manipulation of information': Campbell's law states that 'the more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures' (Campbell 1976); @BULLET 'free riding': this occurs when a team member is trying to take advantage of a team effort without contributing to it (e.g. in the case of targets at the level of the health facility) (Laffont & Martimort 2002; Ostrom et al. 2002), which may lead to reduced motivation among other health workers. On the other hand, posit an alternative view: the best performing team members have an interest in encouraging their peers and monitoring the latter's performance, and thus improving everyone's performance. ...
... Thirdly, traditional P-A theory perceives agents as homo economicus and warns against a number of possible perverse behavioural responses ('rent seeking behaviour') to highpowered incentive schemes such as PBF. These are: @BULLET 'gaming': agents take 'actions that increase pay-outs from the incentive contract without improving actual performance' (Baker 1992); @BULLET 'cherry-picking': only patients that make it easier to reach the target are being treated or work in rural and poorer health centres is being refused; @BULLET 'task trade-off': the payment scheme 'direct[s] the allocation of the agents' attention among their various duties'(original emphasis) (Holmström & Milgrom 1991) and among the different aspects of their duties (e.g. between quality and quantity) (Holmström & Milgrom 1991; Langebrunner & Liu 2005); @BULLET 'the blatant manipulation of information': Campbell's law states that 'the more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures' (Campbell 1976); @BULLET 'free riding': this occurs when a team member is trying to take advantage of a team effort without contributing to it (e.g. in the case of targets at the level of the health facility) (Laffont & Martimort 2002; Ostrom et al. 2002), which may lead to reduced motivation among other health workers. On the other hand, posit an alternative view: the best performing team members have an interest in encouraging their peers and monitoring the latter's performance, and thus improving everyone's performance. ...
... Thirdly, the crowding-out effect of voluntary source separation on per capita MSW generation deserves special attention. Typical economic approaches generally assume performance-contingent rewards act as a positive stimulus on pursued performance [84,85]. With a corresponding reduction in intrinsically motivated effort [86], such rewards can even cause more than complete crowding-out ...
... Thirdly, the crowding-out effect of voluntary source separation on per capita MSW generation deserves special attention. Typical economic approaches generally assume performance-contingent rewards act as a positive stimulus on pursued performance [84,85]. With a corresponding reduction in intrinsically motivated effort [86], such rewards can even cause more than complete crowding-out of voluntary contributions [21,24,87]. ...
This paper examines how and to what degree government policies of garbage fees and voluntary source separation programs, with free indoor containers and garbage bags, can affect the effectiveness of municipal solid waste (MSW) management, in the sense of achieving a desirable reduction of per capita MSW generation. Based on city-level panel data for years 1998–2012 in China, our empirical analysis indicates that per capita MSW generated is increasing with per capita disposable income, average household size, education levels of households, and the lagged per capita MSW. While both garbage fees and source separation programs have separately led to reductions in per capita waste generation, the interaction of the two policies has resulted in an increase in per capita waste generation due to the following crowding-out effects: Firstly, the positive effect of income dominates the negative effect of the garbage fee. Secondly, there are crowding-out effects of mandatory charging system and the subsidized voluntary source separation on per capita MSW generation. Thirdly, small subsidies and tax punishments have reduced the intrinsic motivation for voluntary source separation of MSW. Thus, compatible fee charging system, higher levels of subsidies, and well-designed public information and education campaigns are required to promote household waste source separation and reduction.
... As suggested in the Introduction, the main differences between capitalist and cooperative firms can be stated by different forms of ownership and governance. Furthermore, since the 1990s, the economic literature has shown that different types of ownership and governance lead to different forms of corporate organization and control [32] [44] [48][50]. Therefore, our two objectives are to describe the specific forms through which capitalist and cooperative firms seek to attain optimal levels of organization and control with respect to their production processes and to define a relative measure of the efficiency achieved by these two firms with respect to such processes. ...
... The costs, determined by the implementation of an ex ante and efficient incentive scheme, are termed agency costs; the costs, determined by the implementation of an imperfect ex post control, are termed monitoring costs. The relationships between shareholders and management typically lead to agency problems (see [48], [51], and [52]); and the same applies to the public company or other forms of collective ownership, where the agency problems characterize the relationships between majority and minority shareholders [53][57]. Another typical agency relation outside the firm is that between lenders and borrowers. ...
... The operation of the NSMF program project shows that the central government attaches great importance to local environmental governance, and environmental protection has become one of the important assessment indicators for the promotion mechanism of local officials. However, according to the theory of multi-objective assessment, when the assessed aspect evaluates multiple objectives, it gives priority to achieving goals that are less difficult and more effective (Holmstrom and Milgrom, 1991). When compared with environmental protection goals, the economic growth goals have clearer measurements and more efficient ways of achieving them. ...
As an important measure of reform of the central environmental supervision, the National Specially Monitored Firms program has a significant impact on enterprise pollution control. However, there are few studies that have systematically studied the mechanism of this system on enterprise environmental performance. Based on the quasi natural experiment of the National Specially Monitored Firms program, this article uses the emission data of industrial enterprises from 2001 to 2009 to investigate the impact of the central environmental supervision on on corporate environmental performance by using the DID method. It is found that the National Specially Monitored Firms program has significantly improved the corporate environmental performance of the monitored enterprises. Heterogeneity analysis finds that when compared with enterprises with a higher degree of financing constraints, export enterprises, and enterprises with a lower level of economic development in the region, the implementation of the National Specially Monitored Firms program has a more significant effect on improving the environmental performance of enterprises with a lower degree of financing constraints, domestic enterprises, and enterprises with a higher level of economic development in the region. The mechanism test shows that improving the enterprise environmental protection equipment investment is not the only intermediary mechanism for the National Specially Monitored Firms program to improve corporate environmental performance. The conclusions of this article are not only conducive in optimizing the environmental governance methods but also inspirational for monitoring practices in other fields.
... Holmstrom and Milgrom [15] proposed that the central government entrusts local governments to manage multiple affairs in their jurisdictions, and avoid conflicts among various tasks. Local officials would choose to increase their efforts on one task, which would lead to poor performance of the other task. ...
In China, the central government assesses local governments based on data monitored and reported by local agencies, and the accuracy of local statistics has been controversial. In order to further guarantee the authenticity and reliability of surface water monitoring data, the central government will gradually withdraw the local monitoring powers of the national surface water assessment section and implement third-party monitoring to achieve “national assessment and national monitoring.” This paper is based on the time-point water data of important national water quality automatic monitoring stations from 2015 to 2020, using the McCrary (2008) density test to infer possible data manipulation phenomena, and analyze whether third-party monitoring has improved the accuracy of China’s environmental data. The results of the study show that between 2015 and 2020, the observed 81 monitoring sites had varying degrees of data discontinuity. The discontinuity of the data after third-party monitoring was reduced in dissolved oxygen (DO) measurement, an important indicator in the assessment, implying that third-party monitoring has improved the quality of water environment data and the accuracy of the data. The research in this article provides a reference for third-party participation in environmental governance and proves that the participation of these organizations can reduce data manipulation behaviors of local governments and ensure the effectiveness of environmental data.
... Salaries were previously considered unsustainable in many low-and middleincome countries, although this assumption is recently being challenged [1,23,30]. Performance-based financial incentives may crowd out intrinsic motivation, encourage over-reporting of focus tasks, and lead to a substitution effect in which CHWs neglect unpaid tasks in favor of those for which they receive financial compensation [1,10,20,25,33,34]. Moreover, performance-based financial incentives may not always be effective motivators if CHWs see them as insufficient, inconsistent, or unpredictable [13,20,35]. ...
Background
Community health worker (CHW) motivation is an important factor related to health service quality and CHW program sustainability in low- and middle-income countries. Financial and non-financial motivators may influence CHW behavior through two dimensions of motivation: desire to perform and effort expended. The aim of this study was to explore how the removal of performance-based financial incentives impacted CHW motivation after formal funding ceased for Alive and Thrive (A&T), an infant and young child feeding (IYCF) program in Bangladesh.
Methods
This qualitative study included seven focus groups ( n = 43 respondents) with paid supervisors of volunteer CHWs tasked with delivering interpersonal IYCF counseling services. Data were transcribed, translated into English, and then analyzed using both a priori themes and a grounded theory approach.
Results
Results suggest the removal of financial incentives was perceived to have negatively impacted CHWs’ desire to perform in three primary ways: 1) a decreased desire to work without financial compensation, 2) changes in pre- and post-intervention motivation, and 3) household income challenges due to dependence on incentives. Removal of financial incentives was perceived to have negatively impacted CHWs’ level of effort expended in four primary ways: 1) a reduction in CHW visits, 2) a reduction in quality of care, 3) CHW attrition, and 4) substitution of other income-generating activities.
Conclusions
This study provides new evidence regarding how removing performance-based financial incentives from a CHW program can negatively impact CHW motivation. The findings suggest that program decision makers should consider how to construct community health work programs such that CHWs may continue to receive performance-based compensation after the original funding ceases.
... Badacze odrzucaj tutaj koncepcje socjologów, przedstawione powy ej, a sk aniaj si ku tezie, e poszczególni cz onkowie grupy (przedsi biorstwa) podporz dkowuj swoje cele w imi lepszego dost pu do informacji, która zapewnia bardziej optymalne wykorzystanie dost pnych zasobów. W teorii agencji przedsi biorstwo maj ce lepszy dost p do informacji sprawia, e kontrakty behawioralne (bazuj ce na staej p acy oraz podporz dkowuj ce pracownika strukturom hierarchicznym) staj si bardziej efektywne ni kontrakty celowe (bazuj ce na prowizji czy te zawierane na wolnym rynku) (Eisenhardt, 1989;Holmstrom i Milgrom, 1991;1994). W tym kontek cie Williamson (1973) definiuje homo economicus jako chytr i przebieg istot . ...
... For example, multitasking—the requirement of civil servants to perform a variety of distinct tasks—generates a host of additional incentive problems and complicates moral hazard and adverse selection still further. Principals might be able to effectively measure only one of the many tasks, inducing agents to neglect the other dimensions of their job (e.g., teaching to the test; Holmstrom & Milgrom 1991). Similarly, Kiewiet & McCubbins (1991) argue that " collective principals " generate additional agency losses because of disagreements among principals about the tasks of the bureaucracy. ...
This article reviews the literature on the politics of bureaucracy in the developing world, with a focus on service delivery and bureaucratic performance. We survey classic topics and themes such as the developmental state, principal–agent relations, and the efficient grease hypothesis, and we link them to new research findings in political science, sociology, and economics. We identify the concept of embeddedness as an important yet still underexplored framework that cuts across disciplines and may be used to understand bureaucratic performance and service delivery. Looking forward, we outline a framework for conceptualizing bureaucratic action by exploiting variation across time, space, task, and client, and we identify promising areas for further research on the bureaucrat–citizen encounter in developing countries. Expected final online publication date for the Annual Review of Political Science Volume 20 is May 11, 2017. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.
... Notice that this expression is independent of the fixed salary t, which serves as an intercept term in the contract. Thus, the fixed salary t can only be used to allocate the total certainty equivalent between the two parties [13]. ...
Recently, the concept of fog computing which aims at providing time-sensitive data services has become popular. In this model, computation is performed at the edge of the network instead of sending vast amounts of data to the cloud. Thus, fog computing provides low latency, location awareness to end users, and improves quality-of-services (QoS). One key feature in this model is the designing of payment plan from network operator (NO) to fog nodes (FN) for the rental of their computing resources, such as computation capacity, spectrum, and transmission power. In this paper, we investigate the problem of how to design the efficient payment plan to maximize the NO's revenue while maintaining FN's incentive to cooperate through the moral hazard model in contract theory. We propose a multi-dimensional contract which considers the FNs' characteristics such as location, computation capacity, storage, transmission bandwidth, and etc. First, a contract which pays the FNs by evaluating the resources they have provided from multiple aspects is proposed. Then, the utility maximization problem of the NO is formulated. Furthermore, we use the numerical results to analyze the optimal payment plan, and compare the NO's utility under different payment plans.
... Thus, financial administrator and chief executives of line ministries tend to write-off such balances. According to Holmstrom and Milgrom (1991), this is not only a negative but also a perverse incentive that rewards agents (departments) for budget – maximizing behaviour (through static or increased funding levels in the next fiscal year). It penalizes agents that engage in cost saving behaviours. ...
... Second, economic theory highlights how effort depends on marginal incentives (e.g. Holmstrom and Milgrom 1991; Holmstrom 1999). Despite having a probationary period, novice teachers in Colombia are rarely dismissed. ...
... Our model, suggesting that no one-size-fits-all solution exists, may thus provide a clear rationale for why this may be the case. Of course, we are not the first who have looked at performance measurability in a principal agent framework; our model builds upon Holmstrom and Milgrom (1991), 5 which first suggested that if agents have to perform multiple tasks, some monitorable and some not, incentive based contracts, which (necessarily) focus on the latter, may induce agents to reallocate effort in an inefficient way. Given that most of the goals associated with the actions of public sector organizations are by nature not univocal and cannot always be planned and defined before their executions (Moore, 1995; Alford and Hughes, 2008), it is difficult to map them in performance indicators (Propper and Wilson, 2003; Behn, 1998 Behn, 2003). ...
Monitoring technologies and pay for performance (PFP) contracts are becoming popular solutions to improve public services delivery. Their track record is however mixed. To show why this may be the case, this paper develops a principal agent model where agents’ motivations vary and so the effectiveness of monitoring technologies. In such a set-up, it shows that: (i) monitoring technologies should be introduced only if agents’ motivations are poor; (ii) optimal PFP contracts are non-linear/non-monotonic in agents’ motivations and monitoring effectiveness; (iii) investments aimed at improving agents’ motivations and monitoring quality are substitutes when agents are motivated, complements otherwise; (iv) if the agents’ “type” is private information, the more and less motivated agents could be separated through a menu of PFP/non-PFP contracts, designed in a way that only the less motivated ones choose the PFP.
... More than simply substituting a set of values for a proxy whereby the original values are measured using different means, it builds a value system that is qualitatively different and actually antithetical to the growth that characterises learning (see Holmstrom & Milgrom 1991 for a formal model for such a process). Here, we illustrate several ways in which the quality of work can be communicated to a colleague as examples from which we construct a comparison between traditional and MMB systems. ...
Neoliberalism exults the ability of unregulated markets to optimise human relations. Yet, as David Graeber has recently illustrated, it is paradoxically built on rigorous systems of rules, metrics and managers. The potential transition to a market-based tuition and research funding model for higher education in Australia has, not surprisingly, been preceded by managerialism, metrics and bureaucratisation (rendered hereafter as ‘MMB’) in the internal functioning of universities in the last decade. This article explores the effects of MMB on the lives of academics, the education of students, and the culture and functioning of universities. By examining some of the labour activities of academics, work scheduling and time use, we demonstrate that MMB reduces the efficiency and quality of academic teaching, research and administration. Even more worrying, by qualitatively assessing the language, values and logic increasingly present in the academic culture of higher education in Australia, we show that MMB does not simply fail to improve universities or accurately assess academic achievement, it replaces the core values of education with hollow bureaucratic instrumentalism.
... Moreover, if a producer accepts the incentive contract, he can not supply his input at the spot market. Following Holmstrom and Milgrom (1991), we consider that the structure of the ...
The central purpose of this paper is to examine the incentive contract as an equilibrium phenomenon. We analyse a model of vertical differentiation in which we deal with the strategic role of the competitor’s decisions in a successive duopoly. Is it better for a processor to offer an incentive contract to an upstream producer or the spot market? We determine the equilibrium of a game in which the processors simultaneously decide whether to offer an incentive contract or to continue at the spot market to acquire their input. Our results show that under successive duopoly, offering an incentive contract constitutes the unique equilibrium solution, which highlights the incentive contract persistence.
... Dessa forma, a expectativa de recessão oriunda da possível expansão da crise financeira originada nos EUA colocaria a solvência da DPaschoal em jogo. Além disso, deve-se apontar o fenômeno de multi-task (Holmstrom & Milgrom, 1991TAC, Rio de Janeiro, v. 6, n. 2, pp. 133-151, Jul./Dez. ...
The DPaschoal case is an example of realignment of various elements of organizational architecture in order to adapt to external contingencies. The case focuses on the best incentive structure to be used to match the concept of creating value for the client. DPaschoal has been in the market since 1949, and is a leader in the automotive industry, selling products and providing quality services primarily linked with maintenance (tires, brakes, etc.). The case shows how DPaschoal’s performance resulted an increase in sales, while paradoxically suffering a severe decrease in post-sale customer satisfaction.
... So in this respect, a multitask job design is complementary to high-powered incentives. The second proposition, in contrast, suggests that if the tasks conducted by the employee are characterised by different degrees of measurability , then the high-powered incentives should be substituted with a fixed salary (Hannaway, 1992; Holmström & Milgrom, 1991). In a multitask situation in which the tasks have different degrees of measurability and low interdependence, high-powered incentives will direct attention towards the easy-to-measure task and away from the hard-to-measure task; this is clear, for example, in Hannaway's discussion of incentivising basic learning and higher learning skills in primary schools (Hannaway, 1992 ). ...
... Les règles a, b, c, d et e sont implémentées. La modication des fonctions de production peut se faire avec de très faibles modications, s'inspirant de l'analyse de la coopération entre deux travailleurs (Drago and Turnbull, 1988) et du concept de multi-tâches (Holmstrom and Milgrom, 1991). Le senior i consacre une fraction a1 i de son temps de travail à la production et une fraction a2 i = 1 − a1 i à la transmission de ses connaissances au junior, pendant 3 ans maximum. ...
An agent-based model of the french labor market, applied to the evaluation of employment policies: the example of the “generation contract”
This article presents an agent-based model of the French labor market and uses it for ex ante simulations of the effects of the “Generation Contract.” The model simulates the decisions and interactions of individuals and firms (10,000 agents in our simulations) which take place in a duly specified economic and legal environment. The decisions consist for firms in creating or suppressing jobs of two types, Fixed Duration Contracts, and Open Ended Contracts, as well as hiring, promoting, and laying off their employees. The individuals apply for jobs, and can quit. The interactions induce gross flows between the states of employed, unemployed, and inactive, flows which generate complete stock-flow accounts. A calibration algorithm enables us to reproduce the main caracteristics of the French labor market in 2011, which is strongly structured by the coexistence of Fixed Duration Contracts, and Open Ended Contracts. As simulated by the model, the Generation Contract is expected to lower youth unemployment, but the effect is small due to very important windfall effects as well as moderate crowding out effects. The trajectories of the youths who have benefited from the Generation Contract show a positive effect on their employment rate in the long run. Variants show that it is not easy to improve the policy scheme.
Classification JEL : C63, J63, J64, J65, J68, K31.
... Moreover, these results are consistent with previous analyses based on aggregated indicators of breast cancer screening calculated by the Health Insurance Fund, showing that since the implementation of CAPI, GPs underperform in terms of breast cancer screening indicator, whether being CAPI signatory or non-signatory [7]. Because 15 other indicators were defined in the CAPI, all proposing similar or higher monetary rewards (see Appendix 1), GPs may have focused on other indicators providing higher pay-offs and/or less efforts: the well-known multitasking problem [35, 36]. Another possible interpretation of the result is that the incentive effect of the CAPI might have been diluted in time because some GPs did not sign the CAPI immediately after its implementation. ...
Background
A voluntary-based pay-for-performance (P4P) program (the CAPI) aimed at general practitioners (GPs) was implemented in France in 2009. The program targeted prevention practices, including breast cancer screening, by offering a maximal amount of €245 for achieving a target screening rate among eligible women enrolled with the GP.
Objective
Our objective was to evaluate the impact of the French P4P program (CAPI) on the early detection of breast cancer among women between 50 and 74 years old.
Methods
Based on an administrative database of 50,752 women aged 50–74 years followed between 2007 and 2011, we estimated a difference-in-difference model of breast cancer screening uptake as a function of visit to a CAPI signatory referral GP, while controlling for both supply-side and demand-side determinants (e.g., sociodemographics, health and healthcare use).
Results
Breast cancer screening rates have not changed significantly since the P4P program implementation. Overall, visiting a CAPI signatory referral GP at least once in the pre-CAPI period increased the probability of undergoing breast cancer screening by 1.38 % [95 % CI (0.41–2.35 %)], but the effect was not significantly different following the implementation of the contract.
Conclusion
The French P4P program had a nonsignificant impact on breast cancer screening uptake. This result may reflect the fact that the low-powered incentives implemented in France through the CAPI might not provide sufficient leverage to generate better practices, thus inviting regulators to seek additional tools beyond P4P in the field of prevention and screening.
Background
To promote sustained contributions by physicians to online health care communities, these platforms have introduced a content payment model that offers economic incentives for physicians’ online knowledge activities. However, the impact of these paid features on unpaid knowledge activities remains unexplored.
Objective
This study investigated how the introduction of economic incentives in online medical communities affects physicians’ unpaid knowledge activities in the community.
Methods
The data for this study were obtained from the Haodf Online platform in China, which has implemented paid scenarios for its science popularization function, providing economic benefits to physicians. The dataset, which comprises panel data, includes 7453 physicians who participated in both paid and unpaid knowledge contributions on the website. This study examined the impact of paid knowledge activities on physicians’ free knowledge contributions, focusing on dimensions including knowledge quantity, quality, and diversity. To address the timing discrepancies in physicians’ participation in paid activities, we used a quasi-experimental design that combined the approach of propensity score matching and multi-period difference in differences.
Results
In the balance test results of the propensity score matching, the absolute values of the SDs of all matching variables were mostly <5% after matching, ensuring the accuracy of the results obtained from the difference in differences method. This study found that participation in paid knowledge activities had a positive spillover effect on physicians’ free knowledge contributions, which manifested in the increase in post quantity (473.1%; P<.001), article length (108%; P=.009), function word frequency (0.6%; P=.001), causal word frequency (0.2%; P<.001), and content information entropy (6.6%; P=.006). The paid function led to a decrease in the consistency between titles and content (–115.5%; P<.001).
Conclusions
The findings of this study contribute to the existing literature on the impact of economic incentives in the medical context. For the platform, providing economic incentives to physicians can have positive significance in promoting the development of the platform’s knowledge ecosystem and can effectively encourage physicians to contribute to both paid and free knowledge activities. This study provides a valuable reference for the platform to introduce a paid knowledge model, which is beneficial to the sustainable development of the platform.
We study how the precision of managers’ private post-contract pre-decision information affects the pay–performance relation. Endogenizing the information environment, we find that firms may optimally tie executive pay closer to firm performance as agency problems become more pronounced. Specifically, varying parameters measuring the severity of the agency problem, we identify parameter regions where firms with more pronounced agency problems optimally combine uninformative signals with a higher incentive rate than firms with less pronounced agency problems that optimally choose a perfect signal. We find this relation for various measures of the agency conflict such as the incongruency of the performance measure, its susceptibility to manipulation, or the agent’s degree of risk aversion. Because the pay–performance sensitivity is frequently used for measuring the efficiency of real-world compensation arrangements, our results provide relevant insights for empirical research studying the determinants of the relation between executive pay and firm performance.
JEL Classifications: D81; D86; M12; M52.
Incentive contracts often do not govern all task elements for which an employee is responsible. Prior research, particularly in the tradition of principal-agent theory, has studied incomplete incentive contracts as multi-task problems focusing on how to motivate the employee to incur effort for a not-contracted task element. Thus, emphasis is on the “vertical” relation between superior and subordinate, where both are modeled as gifted economic actors. This paper takes another perspective focusing on the “horizontal” interferences of—contracted and not-contracted—task elements across various employees in an organization and, hence, on the complexity of an organization’s task environment. In order to disentangle the interactions among tasks from agents’ behavior, the paper pursues a minimal intelligence approach. An agent-based simulation model based on the framework of NK fitness landscapes is employed. In the simulation experiments, artificial organizations search for superior performance, and the experiments control for the complexity of the task environment and the level of contractual incompleteness. The results suggest that the complexity of the task environment in terms of interactions among task elements may considerably shape the effects of incomplete incentive contracts. In particular, the results indicate that moderate incompleteness of incentive contracts may be beneficial with respect to organizational performance when intra-organizational complexity is high. This is caused by stabilization of search resulting from incomplete contracts. Moreover, interactions may induce that the not-contracted task elements could serve as means objectives, i.e., contributing to achieving contracted task elements.
This paper analyses the impact of a tax break on incentive pay (introduced in Law n. 208/2015) on labour productivity and average wages in Italian firms. We use a unique source of firm‐level information drawn from a large representative survey of Italian firms merged with the ORBIS archive. By applying difference‐in‐differences methods, we obtain the following results. First, the tax break has a positive effect on both labour productivity and average wages, although the positive effect on average wages is not confirmed by robustness tests. Second, productivity impacts are mainly driven by family firms in northern regions, where firms benefit from the more dynamic business environment in which they operate. These results take into account unobserved heterogeneity and endogeneity issues.
Under the information asymmetry, we consider the impact of task importance on the income of university managers, introducing the non-linear income function of university managers. Based on the principal-agent theory, we construct a non-linear incentive optimisation model for subject librarians. We discussed how university managers allocate incentive intensity and how the subject librarians allocate the effort level to achieve the best net expected income for university administrators and subject librarians while satisfying the constraints of participation and incentive compatibility. The results show that the optimal incentive contract for subject librarians is related to task importance, ability level, risk aversion characteristics and the randomness of the external environment in university libraries. The relative incentive intensity increases with the increase of task importance, risk aversion, ability level and randomness of information retrieval tasks, and decreases with the increase of randomness of subject service tasks.
The paper proposes a game model with an additive convolution of two criteria, describing public and personal interests. The first (general) criterion depends on strategies of all players and represents losses from the intensity of their activity. The second (particular) criterion for each player is a function of his strategy and reflects the income from his activities. The negative definite quadratic form is taken as a general criterion. The particular criterion of each player is linear, which is quite natural for the formalization of the income function. It turns out that the resulting game with linear-quadratic payoff functions has good properties, in particular, the independence of the leader’s strategy in the Stackelberg equilibrium from the parameters of the follower’s linear functions (in contrast to the Nash equilibrium). This property means that the leader does not need accurate information about the follower’s objective function, and his strategy has the property of robustness.
The Stern-Stiglitz Report on carbon pricing emphasizes that environmental policy must not only cope with market failures, but also with government and organizational failures. Focusing on the latter, this paper investigates how some practices central to human resource management - employee selection and training, performance appraisal and rewards, employee discretion and empowerment - can be jointly deployed to direct managerial attention adequately. Using a static multi-task principal-agent model and standard monotone comparative statics tools, I derive predictions/prescriptions on how these practices should adjust as the firm's stakes in sustainability increase. These prescriptions notably include some qualifications concerning the outsourcing of environmental services and employee training, and some implications for public policy.
The selection and weighting of performance indicators are of vital importance for an effective compensation contract. We examine the effect of the reclassification of income statement items, caused by China’s new Accounting Standards for Business Enterprises (ASBE) in 2007 on the weight adjustment of compensation performance indicators. The results show that the sensitivity of executive pay and investment income increases significantly after ASBE moves investment income in the income statement from below-the-line of operating income to above-the-line, which indicates that the disclosure position of income statement items is directly related to the weight of compensation performance indicators. We also find that the earnings persistence of investment income increases significantly after ASBE, which implies that the reclassification of investment income conforms to business practice and also performs well. However, the increased sensitivity of executive pay and investment income may induce management’s opportunistic investment in financial assets.
The fiscal decentralization system under China’s political centralization affects local economic and environmental policies, and thus has an important impact on environmental quality. This paper uses the panel data of 285 cities in China from 2003 to 2018 and the spatial Durbin model to empirically analyze the impact of fiscal decentralization on haze pollution and its mechanism. The results show that the increase in fiscal decentralization will significantly aggravate the haze pollution in and around the region, and this conclusion is still valid after a series of robustness tests. Moreover, the impact of fiscal decentralization on haze pollution has significant heterogeneity in the size and region of the city, and the sample period. In addition, mechanism analyses show that fiscal decentralization has aggravated haze pollution by increasing infrastructure construction, reducing environmental regulations, and intensifying market segmentation. Further analyses reveal that, on the one hand, local governments have the ability to control haze pollution in their own regions according to their own wishes and interests, but on the other hand, adjustments to environmental policies in surrounding areas will significantly inhibit the control of environmental policies in the region, thereby making local governments haze pollution has not been effectively controlled. This is essentially a “Race to bottom” phenomenon among local governments in environmental policies.
Performance incentives to increase motivation; potentials for meaningful activities in project management, the author will concretize this with meaningful activities in project management. The ideal project leader is described by Mark Twain in his novel “The Adventures of Tom Sawyer” (Twain, 1876) in the episode of Tom Sawyer painting the fence. Tom is able to motivate his friends for the actually boring activity in a way that they are willing to support him voluntarily. Regarding the law of human action discovered by Tom Sawyer, Mark Twain states: “To awaken a person’s desire, all that is needed is to make the object difficult to reach” (Twain, 1876). In 2006 Ariely, Loewenstein and Prelec examined the rules of irrational action described by Twain. They conclude that individuals make decisions based on their intrinsic motivation and sometimes not on “what is reasonable” (Ariely, Loewenstein, & Prelec, 2006). This enthusiasm of a project leader is transformed in this article and is reflected as a component “project brand strength” in the performance assessment of a project leader (Zwerenz, 2019). The author’s experience as a project leader in the implementation of several major projects also takes up this enthusiasm and expands it to include the identification of the project teams with themselves and the aspect of meaningful activities as an incentive in project management. That identification and motivation are on the one hand necessary to enjoy one’s profession seems understandable, on the other hand the boundaries between vocation and exhaustion are quickly crossed. Schmalenbach describes this in the article “Sacrifice of passion” in “DIE ZEIT”, issue 2-2019 with the provocative sentence “If you break down, you are a better person”. Committed project managers develop a very similar passion for “their” project and thus a comparable identification with their profession. The tension between income, recognition and prosperity is discussed. Furthermore, the dependencies of meaningfulness, recognition and income are derived from the literature and presented as factors influencing personal well-being. Finally, this article contributes to the design of a motivating variable remuneration system for project managers and other exposed occupational groups.
Entrepreneurship can be seen as an agent of innovation and with regard to the concept of responsible innovation society should be its principal. But how should such principal-agent relationships be designed? This perspective wants to draw attention to this crucial question for the implementation of responsible innovation.
An extensive literature is devoted to differences between for-profit and non-profit health-care providers’ prices, utilization, and quality. Less is known about for-profit and non-profit managers’ compensation and its relationship with financial and quality performance. The aim of this study is to examine whether for-profit and non-profit nursing homes place differential weights on financial and quality performance in determining managers’ compensation. Using a unique 8-year dataset on Ohio nursing homes, fixed-effect regression models of managers’ compensation include financial and quality performance as well as other explanatory variables concerning firm and market characteristics and manager qualifications. Among for-profit nursing homes, compensation of owner-managers and non-owner managers are compared. Compensation of for-profit managers is significantly positively associated with profit margin and return-on-assets, while compensation of non-profit managers does not exhibit any consistent relationship with financial measures. Compensation of neither for-profit nor non-profit managers is significantly related to quality measures. Nursing home size and managers’ years of experience are the only consistent determinants of compensation. Owner-managers earn significantly higher compensation than non-owner managers and their compensation is less related to nursing home performance. Finding that home size and experience are strong determinants of compensation, and the association with ownership and financial performance for for-profit nursing homes are as expected. The insignificant relationship between compensation and quality performance is potentially troublesome.
Este trabalho desenvolve um modelo teórico para compreender a elaboração do desenho de Parcerias Público Privadas. Toma-se como base o modelo de Iossa e Martimort (2012), modificando-o com a adição de um parâmetro que mede a sensibilidade dos esforços entre os estágios do projeto e também delimitando a variável que determina a flexibilidade da tecnologia. Neste sentido, o regime de bundling, em que as empresas são agregadas em um consórcio, mostra-se se superior ao que as empresas são contratadas separadamente. Isto se dá porque no primeiro modelo, as firmas conseguem internalizar as externalidades advindas do processo produtivo. Por outro lado, mesmo que este regime se mostre mais eficiente, o governo deve procurar mecanismos que monitorem eficientemente o índice de qualidade dos serviços.
This paper examines the incentive performance of liability and regulation when a potential injurer can take two types of preventative care, one of which is observed and one of which is not. The problem is studied in a general asymmetric information model, where settlement behavior is endogenous and which incorporates an uncertain legal standard. Contrary to existing literature, we find (1) a shift to a negligence rule may have a perverse effect on unobserved care; (2) uncertainty in legal standards may be socially beneficial as it provides a relatively good incentive for unobserved care; (3) a regulation may not be effective if preventative care efforts are substitutes but is effective if they are complements; (4) an increase in settlement rate may or may not increase the level of care, depending on the cause of the increase; (5) a “decoupling” arrangement with a feature that the defendant pays more than the plaintiff recovers, reduces legal costs and is therefore socially beneficial.
The theory of the firm and the profit maximization have been important areas of debate among Islamic economists as being fore bearers of applicability of conventional economic theory in the Islamic economics. One strand of the debate holds the view that the postulate of profit maximization, as a useful theoretical construct, has to be modified for a firm operating in an Islamic economy, while the other strand highlights that Islamic economy has its own normative rules with an underlying institutional scaffolding derived from the Qur'an and Sunnah. Following the second view, this paper is a modest contribution to the debate by demonstrating that once an institutional scaffolding containing the rules of behavior compliant with the Qur'an and Sunnah is in place, the profit maximization postulate becomes a useful concept in Islamic economic theory. The paper also shows that allocation efficiency with equity is possible provided that the firm is rule-compliant, even in case of a monopoly.
Recent literature suggests that labor related issues can impact corporate innovation. In this study we hypothesize and find that firms with congenial work environments innovate more and have greater innovative efficiency. Our results also suggest that cash profit sharing and employee involvement have a positive bearing whereas union relationships have a negative impact on innovation output of a firm. In addition, subsample analysis reveals that employee-friendly policies are more important in industries having higher employee power. Our results are consistent with the logic that happy and satisfied employees tend to be more productive than the unhappy and dissatisfied ones. Our work suggests a channel through which satisfied employees contribute towards increasing firm value − by increasing the innovation productivity and efficiency of the firm. So, firms must make continued efforts towards creating and maintaining a friendly work environment.
Timely and accurate diagnosis is foundational to good clinical practice and an essential first step to achieving optimal patient outcomes. However, a recent Institute of Medicine report concluded that most of us will experience at least one diagnostic error in our lifetime. The report argues for efforts to improve the reliability of the diagnostic process through better measurement of diagnostic performance. The diagnostic process is a dynamic team-based activity that involves uncertainty, plays out over time, and requires effective communication and collaboration among multiple clinicians, diagnostic services, and the patient. Thus, it poses special challenges for measurement. In this paper, we discuss how the need to develop measures to improve diagnostic performance could move forward at a time when the scientific foundation needed to inform measurement is still evolving. We highlight challenges and opportunities for developing potential measures of "diagnostic safety" related to clinical diagnostic errors and associated preventable diagnostic harm. In doing so, we propose a starter set of measurement concepts for initial consideration that seem reasonably related to diagnostic safety and call for these to be studied and further refined. This would enable safe diagnosis to become an organizational priority and facilitate quality improvement. Health-care systems should consider measurement and evaluation of diagnostic performance as essential to timely and accurate diagnosis and to the reduction of preventable diagnostic harm.This is an open-access article distributed under the terms of the Creative Commons Attribution-Non Commercial-No Derivatives License 4.0 (CCBY-NC-ND), where it is permissible to download and share the work provided it is properly cited. The work cannot be changed in any way or used commercially without permission from the journal.
The Public-Private Partnership contracts have been increasingly used in Brazil for the construction and management of prisons. However, these contracts occur in an environment of asymmetric information, which might lead to a problem of moral hazard. This environment is analyzed in this paper through a Principal Agent model involving the State (Principal) and a consortium of companies that have signed the PPP contracts (Agent). In this model, the benefit of the Principal crucially depends on the quality of the services provided by the Agent (private sector), which might be unobservable, thus creating the information asymmetry. Therefore, it is important to create incentives that can mitigate moral hazard in order to reach a high quality service and achieve an efficient allocation of resources. The proposed theoretical model suggests that PPP contracts in which the company that manages the prison outsources the service of rehabilitation of detainees present the most efficient allocations.
Este trabalho tem como objetivo discutir as diversas contribuições dadas ao longo das últimas décadas à economia dos recursos humanos, uma área de crescente destaque tanto entre a comunidade acadêmica, quanto entre empresários e trabalhadores. Discutem-se os diversos tópicos que compõem as abrangentes relações empresariais, estabelecidos na literatura em quatro tópicos principais: treinamento, incentivos, organização e seleção de pessoas. É feita uma análise dos principais artigos e autores de cada uma dessas subáreas, com o intuito principal de facilitar o acesso à informação, apontar caminhos para novas pesquisas e incentivar potenciais pesquisadores.
Este artigo apresenta os resultados de um estudo realizado em uma universidade pública do Sul do Brasil tendo como objetivo principal identificar os efeitos do New Public Management (NPM), ou Nova Gestão Pública, na produção de conhecimento científico e no cotidiano dos pesquisadores. Acusado de ser ineficiente, e demasiadamente lento em relação ao atendimento às necessidades dos cidadãos, o modelo tradicional de gestão pública, tanto nos governos como nas universidades, ao longo das últimas décadas, vem sofrendo severas críticas por parte da comunidade em geral e, gradativamente, vêm sendo substituído pelo que se convencionou chamar de Nova Gestão Pública. Este novo modelo de gestão baseia-se na introdução de mecanismos de mercado e na adoção de ferramentas da iniciativa privada que incentivam a competição, na expectativa de melhoria da eficiência e dos índices de produtividade. Tendo as avaliações dos programas de pós-graduação como pano de fundo, este estudo centrou-se na investigação de como os pesquisadores estão reagindo às pressões deste modelo de gestão e quais as consequências deste para a produção de conhecimento. Metodologicamente, trata-se de uma pesquisa exploratório-descritiva, na forma de estudo de caso. Conclui-se que, por tratar-se de uma avaliação com base no desempenho quantitativo da produção acadêmica, esta nova forma de avaliar, aliada às mudanças na gestão interna da Instituição estudada, levanta a hipótese do surgimento e consolidação de um novo modelo de gestão, com base na desagregação e na competição, porém sem o componente de incentivo financeiro pessoal.
Public-Private Partnership (PPP) is a new model of public management which consists of the contractual relationship between public and private entities. In particular, PPPs enable risk share between public and private sectors making the asymmetric information problem in a contractual arrangement more evident. The aim of this paper was to study a moral hazard problem applied to PPP contracts. To achieve this objective, a PPP computational contractual model including the moral hazard with lotteries was developed to assess how contractual changes could affect the optimum behavior of arrangement members. Simulations indicate that projects with higher economic value should attract more qualified firms, which may be why the companies expend more effort. To deal with possible contractual contingencies and try to minimize the moral hazard problem, the government could draw up more flexible contracts in order to include possible necessary changes and punish unwanted or improper consortium behavior.
L’efficace funzionamento della Pubblica amministrazione dipende dalla sua capacità
di attrarre e selezionare risorse qualificate e di motivarne l’impegno. Le politiche di
reclutamento e di carriera influiscono sulla composizione del pool di candidati che si
sottopongono alle procedure di selezione. Le modalità con cui queste sono condotte
determinano quali tra i candidati auto-selezionatisi hanno accesso alla PA e quindi l’effettiva
distribuzione delle caratteristiche individuali nella forza lavoro. Quest’ultima, a sua volta,
definisce il contesto in cui progettare i sistemi incentivali. Questo lavoro fornisce una
panoramica delle interazioni tra tali dimensioni e analizza alcune criticità del contesto italiano
– tra cui la diffusione di modalità di reclutamento meno selettive e più precarie, politiche
retributive e di carriera che remunerano poco l’istruzione e le competenze, procedure di
selezione rigide e orientate all’assunzione di profili generalisti, l’applicazione indifferenziata
di sistemi di incentivo a tutta la PA e l’assenza di contestuali interventi di riorganizzazione
delle strutture. Si propone, inoltre, un raffronto critico tra le conclusioni emerse e le direttrici
dei recenti interventi di riforma del pubblico impiego.
Non-contractible quality dimensions are at risk of degradation when the provision of public services is privatized. However, privatization may increase quality by fostering performance-improving innovation, particularly if combined with increased competition. We assemble a large data set on elderly care services in Sweden between 1990 and 2009 and estimate how opening to private provision affected mortality rates – an important and not easily contractible quality dimension – using a difference-in-difference-in-difference approach. The results indicate that privatization and the associated increase in competition significantly improved non-contractible quality as measured by mortality rates.
We propose a novel approach to the analysis of organizations by developing a computerized platform that reproduces relevant features of existing organizations such as real-effort tasks and real-leisure alternative activities (Internet). In this environment, we find strong incentives effects as organizations using individual incentives significantly outperform those relying on team incentives. Combining real-time peer monitoring with team incentives, we report striking evidence of positive peer effects as production increases by 50% and Internet usage decreases by 54% compared with organizations using team incentives alone. Peer monitoring allows virtual organizations using team incentives to perform as well as those using individual incentives. However, the positive effect of peer monitoring does not apply to low performers.