Wage Floors, Imperfect Performance Measures, and Optimal Job Design

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWe analyze the e¤ects of wage ‡oors on optimal job design in a moral-hazard model with asymmetric tasks and imperfect aggregate performance measurement. Due to cost advantages of specialization, assigning the tasks to di¤erent agents is e¢ cient. A su¢ ciently high wage ‡oor, however, induces the principal to dismiss one agent or to even exclude tasks from the production process. Imperfect performance measurement always lowers pro…t under multitasking, but may increase pro…t under specialization. We further show that variations in the wage ‡oor and the agents'reservation utility have signi…cantly di¤erent e¤ects on welfare and optimal job design. We would like to thank Michael Burda, Guido Friebel, Oliver Gürtler, Manuela Hirsch, Ola Kvaløy, Jörg Oechssler, Andreas Roider, Patrick Schmitz, Wendelin Schnedler as well as three anonymous referees. We are also grateful for helpful comments on an earlier version of this paper at the

On Multitasking and Job Design in Relational Contracts*

“…The argument on the optimal job design of spot contracting is consistent with Kragl and Schöttner [2014]. Since there is no limited liability constraint in our model, as they argue, separating tasks across multiple agents yields no additional costs.…”

“…On the one hand, mitigating misallocation of effort is usually a benefit of task separation. On the other hand, drawbacks of task separation include: additional risk premium payments in the case of risk-averse agents (Itoh [1994(Itoh [ , 2001), excess rent provision due to limited liability (Kragl and Schöttner [2014]) and loss of information benefit from task complementarity (Zhang [2003]; Hughes et al [2005]). All of these articles analyze a one-shot moral hazard model with multiple tasks and verifiable performance measurements.…”

“…There are two remarks on the related articles. First, the optimality of task exclusion is also pointed out by Kragl and Schöttner [2014], who consider a one-shot relationship in which the performance measurement is verifiable and the agents are protected by wage floors. They demonstrate a monotonic relationship in that a task is more inclined to be excluded as the wage floor increases given that the degree of distortion of the performance measurement is fixed.…”

Strategic Shirking: A Theoretical Analysis of Multitasking and Specialization

“…Kragl and Schöttner () propose a model in which the firm can either hire two workers (each assigned to one task) or one worker who must handle both tasks. Their focus is on the effect of wage floors on the optimal job design.…”

Multitasking: incentivizing agents differing either in their work ethic or intrinsic motivation

“…The chosen multitasking framework and its potential applications are related to many papers in industrial organization, labor and managerial economics. For example, Kragl and Schöttner (2014) consider the probability of completing a task by an agent engaged in two kinds of efforts with costs similar to our model, but no benefits from an intrinsic motivation. It falls into the line of multi-tasking papers going back at least to Feltham and Xie (1994), who analyze how to reward an agent on the basis of a performance measure, strictly separable cost functions, and risk.…”