Selfish bakers, caring nurses? A model of work motivation

Work contributes to people’s self-image in important ways. We propose a model in which effort is unobservable and where individuals have a preference for being important to others. This gives the following predictions: (1) if a worker’s effort is paid by his marginal productivity (bakers), effort is just like in the standard model. (2) If a worker’s wage is unaffected by his effort (nurses), more effort is provided than in the standard model. (3) To prevent that shirkers become nurses, nurses’ wages must be kept strictly lower than bakers’ income. At this wage level there will be too few nurses. (4) Overinvestment in nursing equipment can be justified as a means to attract motivated nurses. (5) Even with full income compensation, both nurses and bakers may experience a net utility loss when losing their job. (6) Similarly, both nurses and bakers may prefer work to welfare, even with full income compensation.