Lazear and Co-authors' Study on Employment Rents and Productivity During a Recession

A technology firm pays its salaried software developers a wage that is substantially higher than the industry average. The nature of their collaborative work makes it difficult to measure individual output. Recently, the government significantly increased the value and duration of unemployment benefits available to all citizens. How will this change in government policy most likely impact the developers' motivation to work hard, based on the incentive structure in place?

Calculating Employee Motivation

Deconstructing the Incentive to Work

Designing an Incentive Scheme for a Creative Agency

Match each economic scenario to the description that best explains its effect on a worker's employment rent (the net value of their job compared to their next best alternative).

A company that pays its workers a wage significantly above the market rate, thereby creating a large employment rent, will always successfully motivate its employees to exert high effort, regardless of its other employment policies.

The net value a worker gains from their job, which acts as an incentive to perform well, is determined by the wage received minus two key factors: the disutility of effort and the worker's ______. This second factor represents the value of their next best option (e.g., unemployment).

A company decides to pay its workers a wage that is higher than their next best alternative to motivate them to work hard. Arrange the following statements into the correct logical sequence that explains how this higher wage translates into increased employee effort.

Evaluating Competing Incentive Strategies

Analyzing the Failure of an Incentive Strategy