Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20475
Authors: 
Dickinson, David
Villeval, Marie-Claire
Year of Publication: 
2004
Series/Report no.: 
IZA Discussion paper series 1222
Abstract: 
Agency theory assumes that tighter monitoring by the principal should motivate the agent to raise his effort level whereas the ?crowding-out? literature suggests that it may reduce the overall work effort. These two assertions are not necessarily contradictory provided that the nature of the employment relationship is taken into account (Frey, 1993). Based upon a realtask laboratory experiment, our results show that principals are not trustful enough to refrain from monitoring the agents, and most of the agents react to the disciplining effect of monitoring. However we find also some evidence that intrinsic motivation is crowded out when monitoring is above a certain threshold. We identify that both interpersonal principal/agent links and concerns for the distribution of output payoff are important for the emergence of this crowding out effect.
Subjects: 
principal-agent theory
monitoring
crowding-out
motivation
real effort experiment
JEL: 
M5
C92
J24
Document Type: 
Working Paper

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