Document Type

Article

Journal/Book Title/Conference

Economics Research Institute Study Paper

Volume

5

Publisher

Utah State University Department of Economics

Publication Date

2000

Rights

Copyright for this work is held by the author. Transmission or reproduction of materials protected by copyright beyond that allowed by fair use requires the written permission of the copyright owners. Works not in the public domain cannot be commercially exploited without permission of the copyright owner. Responsibility for any use rests exclusively with the user. For more information contact the Institutional Repository Librarian at digitalcommons@usu.edu.

First Page

1

Last Page

31

Abstract

When employers observe imperfect measures of worker effort, theorists typically assume that the observation of effort is unimodal and symmetrically distributed. This paper presents empirical evidence from two experimental work environments that question the assumption of symmetric distributions of observed effort. For these piece-rate work environments we find that observed effort is significantly negatively skewed (i.e., modal> mean effort). Two possible explanations are intra-period learning and/or on-the-job leisure. There are both theoretical and practical implications of this asymmetry. Some implications that are discussed, include: self-selection into rank -order tournaments, optimal wage spreads in rank -order tournaments, and optimal wage contracts with asymmetric information.

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