DP15498 Workplace Incentives and Organizational Learning

Author(s): Francesco Amodio, Miguel Martinez-Carrasco
Publication Date: November 2020
Date Revised: February 2021
Keyword(s): Inputs, Organizational Learning, workplace incentives
JEL(s): D22, D24, J24, J33, M11, M52, M54, O12
Programme Areas: Labour Economics, Industrial Organization, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15498

This paper studies learning within organizations when incentives change. We use a simple principal-agent model to show how, in the presence of imperfect information over the shape of the production function, workers' effort choice changes over time as information is disclosed and processed. We also show that changing incentives can trigger this learning process. We test this prediction using personnel data from an egg production plant in Peru. Exploiting a sudden change in the contract parameters, we find that workers learn from each other over the shape of the production function. This adjustment process is costly for the firm.