Monitoring and Intrinsic Motivation: Evidence from Liberia’s Trucking Firms
Golvine de Rochambeau (Columbia University)

Abstract : Severe information asymmetries are thought to make contracting particularly difficult within (and across) firms in developing countries. Standard principal-agent theory predicts that a new monitoring technology provided at zero cost should be widely adopted and un- ambiguously raise workers’ effort. I test this classical prediction using a field experiment with trucking companies in Liberia. The treatment offered to install GPS tracking devices on randomly selected trucks at no cost. Treatment-on-the-treated estimates reveal that the tracking devices increased monitored drivers’ average speeds by 58 percent, without leading to higher accident rates or maintenance costs. Despite this, managers declined to install the devices on 35 percent of the trucks selected for treatment. Using a model of intrinsic motiva- tion, I show that it may be optimal not to monitor workers who are intrinsically motivated to work hard. While monitoring technologies increase agents’ extrinsic incentives to provide effort, they also do not allow worker to show that he or she does not need these incentives to work hard, which can crowd out effort. I provide three pieces of evidence in support of this explanation. First, Liberian trucking company managers choose to install tracking devices only on the trucks of drivers who perform less well at baseline. Second, the treatment effect on speed for monitored drivers is greater the lower the performance of the driver at baseline. Finally, I show that for drivers who performed well at baseline, the treatment has a negative effect on the relation between the manager and the driver, and on the driver’s propensity to follow the rules of the business. Overall, this paper demonstrates that, while new monitoring technologies can dramatically raise some workers’ productivity in settings where employment contracts are difficult to enforce, their use may lower the productivity of some workers - those who are intrinsically motivated to work hard.

Supervisors and Performance Management Systems
Anders Frederiksen (Aarhus University)
Lisa B. Kahn (Yale, SOM)
Fabian Lange (McGill University)

Abstract : Supervisors occupy central roles in production and performance monitoring. We study how heterogeneity in performance evaluations across supervisors affects employee and supervisor careers and firm outcomes using data on the performance system of a Scandinavian service sector firm. We show that supervisors vary widely in how they rate subordinates of similar quality. To understand the nature of this heterogeneity, we propose a principal-agent model according to which supervisors can differ in their ability to elicit output from subordinates or in their taste for leniency when rating subordinates. The model also allows for variation in how informed firms are about this heterogeneity. Within the context of this model, we can discern the nature of the heterogeneity across supervisors and how informed firms are about this heterogeneity by relating observed supervisor heterogeneity in ratings to worker, supervisor, and firm outcomes. We find that subordinates are paid significantly more, and their pay is more closely aligned with performance, when they are matched to a high-rating supervisor. We also find that higher raters themselves are paid more and that the teams managed by higher raters perform better on objective performance measures. This evidence suggests that supervisor heterogeneity stems, at least in part, from real differences in managerial ability and that firms are at least partially informed about these differences. We conclude by quantifying how important heterogeneity in supervisor type is for workers' careers. For a typical worker, matching to a high rater (90th percentile) relative to a low rater (10th percentile) for just one year results in an increase in the present discounted value of earnings equivalent to 7-14% of an annual salary.

Experience Markets: an Application to Outsourcing and Hiring
Christopher Stanton (HBS)
Catherine Thomas (LSE)

Abstract : Trying out a market often allows new buyers to learn about the distribution of products or services available. We study how hiring varies with employer experience in an online labor market platform where employers contract with remote workers. Experience affects employer selection into posting further jobs, increases the perceived value of using the market, and alters how employers evaluate individual workers. These changes in demand for workers are consistent with experience reducing employer uncertainty about the distribution of applicants. Job applicants respond with higher wage bids to new employers. We evaluate policies that encourage employer learning about individual market fit.