Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/159792 
Year of Publication: 
2014
Series/Report no.: 
Quaderni - Working Paper DSE No. 953
Publisher: 
Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE), Bologna
Abstract: 
We study optimal contracts offered by two firms competing for the exclusive services of one worker, who is privately informed about her ability and her motivation. Firms differ both in their production technology and in the mission they pursue and a motivated worker is keen to be hired by the mission-oriented firm. We find that the matching of worker types to firms is always Pareto-efficient. When the difference in firms' technology is high, only the most efficient firm is active. When the difference is not very high, then agent types sort themselves by motivation: the mission-oriented firm hires motivated types and the profit-oriented firm employs non-motivated ones, independently of ability. Effort provision is higher when the worker is hired by the mission-oriented firm, but a compensating wage differential might exist: the motivated worker is paid less by the mission-oriented firm. Such an earnings penalty is driven entirely by motivation, is increasing in ability and is associated to low power of incentives.
JEL: 
D82
D86
J31
M55
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Working Paper

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