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The University of Southampton
EconomicsPart of Economic, Social and Political Science

1410 Rewarding Idleness (A. Canidio & T. Gall)

Authors: Andrea Canidio (Central European University) and Thomas Gall (University of Southampton)

Paper No. 1410

Market wages reflect expected productivity by using signals of past performance and past experience. These signals are generated at least partially on the job and create incentives for agents to choose high-profile and highly visible tasks. If agents have private information about the profitability of different tasks, firms may wish to prevent over-investment in visible tasks by increasing their opportunity costs. Firms can do so, for instance, by their choice of corporate infrastructure such as employee perks. Heterogeneity in employee types induces substantial diversity in organizational and contractual choices, particularly regarding the extent to which conspicuous activities are tolerated or encouraged, the use of employee perks, and contingent wages.

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