| This dissertation models firm choice of rules versus worker discretion. Rules substitute for information search, communication and decision-making. Bureaucratic rules became less attractive this century as the relative wage of educated workers fell and information technology raised the value of discretion. I provide the first comprehensive test of "high performance work organization" theory. Bivariate correlations and principal component analysis confirm that the following are complements: worker intelligence, worker education, job creativity, discretion, minimal rules, flexible job content, task variety, job security, rewarding of good behavior (rather than punishing of mistakes), friendly supervisors, helpful supervisors, learning opportunities, pleasant surroundings, cooperative coworkers, meaningful work, job satisfaction, pride in work, and extra effort. If discretion-based workers work harder, why do some firms still use command-and-control? First, rules reduce human capital requirements. Second, rules facilitate coordination. This is especially valuable in large establishments and blue-collar, capital-intensive industries, such as manufacturing. I demonstrate positive correlation among the following: log(establishment employment), dislike of work hours, inflexible work hours, inability to find similar alternative work, unionization, log(weeks required for new hire with sufficient education to learn the job), workplace dangers, dangerous machines, log(employee tenure), whether the job is in manufacturing, whether the work is full-time, whether the worker produces only part of a product/service, log(hourly earnings), and number of fringe benefits provided. Including a weighted average of these variables in a wage regression significantly reduces the size-wage effect and the union-wage effect. Finally, I describe the "Internal Labor Market Development Trap" in which developing nations get stuck with low-mobility labor markets because firms will not provide worker training if workers can easily change employers. This biases growth toward manufacturing and away from knowledge-based industries. Possible solutions are considered, including educational loans (from government or firms) and a "training cost reimbursement" system in which poaching firms must compensate training firms. These solutions foster both training and labor mobility if contractual lock-in is prohibited. |
