The determinants of workers' effort : theory and evidence
The opening chapter of the thesis reviews efficiency wage literature. After considering the theoretical justifications that have been offered for a link from wages to effort, which is at the heart of efficiency wage theory, the chapter continues with an account of the attempts made so far in the literature to test this theory. The first of two empirical chapters examines how effort varies across individual characteristics. The efficiency wage link between individuals' earnings and their effort is investigated in a two-stage least squares framework, to allow for the endogeneity of earnings. Further tests check for the existence of a reverse causality argument. The chapter ends with an investigation into the effect of local unemployment rates on effort. A second empirical chapter examines the effect of workplace characteristics on effort. The influence of trade unions is considered by examining whether management policies to elicit effort from their employees, for example raising the cost of job loss or human resource management techniques, have differential effects on effort according to the degree of unionisation of the workplace. The final chapter is theoretical, considering group norms for effort, whereby the effort choice of individuals is influenced by their colleagues at work. Under the assumption that if a firm observes a single worker shirking, all members of that individual's workgroup will receive a sanction or lose a reward, the effort equilibrium of the workgroup is derived as a non-cooperative Nash equilibrium in expectations and effort choices. Given this equilibrium, the analysis continues by examining whether or not it would be in the workgroup's interest to establish a group norm for supplying effort. Thus the chapter provides a theoretical justification for the existence of, and adherence to, group norms for effort, which has been absent from previous analyses which have included such a concept.