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Job Independence as an Incentive Device
Author(s) -
Mitusch Kay
Publication year - 2000
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/1468-0335.00206
Subject(s) - expropriation , independence (probability theory) , incentive , productivity , economics , microeconomics , business , control (management) , labour economics , market economy , macroeconomics , mathematics , management , statistics
A firm can either subject its workers to strict rules and regulations or grant them independence. If independent, they can make entrenchment‐investments which will not only raise their productivity but also make the firm depend on their cooperation. However, in contrast to a standard holdup problem, the firm can afterwards take over control, thus stripping such workers of a part of their bargaining assets. This leads to structural distortions and may aggravate the holdup problem. However, the threat of partial expropriation may also alleviate the holdup problem and even induce overinvestment.