DP14213 Inputs, Incentives, and Self-selection At the Workplace

Author(s): Francesco Amodio, Miguel Martinez-Carrasco
Publication Date: December 2019
Keyword(s): asymmetric information, incentives, input heterogeneity, Self-selection
JEL(s): D22, D24, J24, J33, M11, M52, M54, O12
Programme Areas: Labour Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14213

This paper studies how asymmetric information over inputs affects workers' response to incentives and self-selection at the workplace. Using daily records from a Peruvian egg production plant, we exploit a sudden change in the worker salary structure and find that workers' effort, firm profits, and worker participation change differentially along the two margins of input quality and worker type. Firm profits increase differentially from high productivity workers, but absenteeism and quits of these workers also differentially increase. Evidence shows that information asymmetries over inputs between workers and managers shape the response to incentives and self-selection at the workplace.