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Title:Division of labour and directed production PDF Logo
Authors:Ratto, Marisa
Schnedler, Wendelin
Issue Date:2005
Series/Report no.:IZA Discussion Papers 1669
Abstract:We examine a situation where efforts on different tasks positively affect production but are not separately verifiable and where the manager (principal) and the worker (agent) have different ideas about how production should be carried out: agents prefer a less efficient way of production. We show that by dividing labour (assigning tasks to different agents and verifying that agents do not carry out tasks to which they are not assigned), it is possible for the principal to implement the efficient way of production. Colluding agents can undermine this implementation. However, if agents have different abilities, collusion can be prevented by a specific assignment of agents to tasks.
Subjects:hidden action
moral hazard
specialisation
job design
JEL:L23
M52
D82
J24
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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