Economics research seminar: Luís Vasconcelos, UTS
Research topic: Which institutions matter for economic growth? An experiment.
Presenter
Topic
Which institutions matter for economic growth? An experiment.
abstract
Managers often rely on their subordinates for local information but cannot commit to how such information would influence their decisions. When the firm and the workers have conflicting interests on how the information is used, incentives for effort and information elicitation become intertwined. We explore how this incentive problem may be solved through job design---the choice between "individual assignment" where all tasks in a given job are assigned to the same worker, and "team assignment" where the tasks are split among a group. Team assignment facilitates information elicitation but suffers from "diseconomies of scope" in incentive provision. This trade-off drives the optimal job design, and it is shaped by two key parameters---the workers' ex-ante likelihood of being informed, and the noise in the performance measure that is used to reward them. Individual assignment is optimal when the performance measure is well-aligned with the firm's objective, but team is optimal when the measure is noisy and the workers are highly likely to be informed about the local conditions.
