Supervision, Pay, and Effort

The shirking and gift exchange models of efficiency wage theory anchor an analysis of the effect of supervision on pay and effort. The contribution hinges on remedying conceptual and analytical limitations of past research to achieve more discriminating tests of the models. The models are supported with respect to pay and effort: (1) autonomous workers are paid more and are more willing to work harder for their employer; (2) workers whose productivity is difficult to evaluate are paid more but are less willing to work harder; and (3) higher pay elicits greater willingness to work harder. Contrary to the models, there is no evidence that sectoral wage differences are due to differences in supervision.