Dismissal versus Fines as a Discipline Device: Comment on Shapiro-Stiglitz

by Ekkehart Schlicht

manuscript, Princeton 1985

Abstract

The discipline device of dismissal, as analysed in the efficiency-wage theory of Shapiro and Stiglitz (1984), is dominated my a system of equivalent fines which would eliminate the efficiency wage effect. The absence of fines is explained by their adverse motivational effects.

Keywords: effviciency wages, discipline, intrinsic motivation, detrimental effect of reward

Journal of Economic Literature classification numbers:  J41, J33

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