Morale and Debt Dynamics

• 成果类型: Article
• 署名作者: Barron, Daniel; Li, Jin; Zator, Michal
• 署名单位: Northwestern University; University of Hong Kong; University of Notre Dame
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4118
• 发表日期: 2022
• 页码: 4496-4516
• 关键词: Relational contracts; PRODUCTIVITY; debt; morale

摘要

This paper shows that debt undermines relational incentives and harms worker morale. We build a dynamic model of a manager who uses limited financial resources to simultaneously repay a creditor and motivate a worker. If the manager can divert or misuse revenue, then debt makes the manager less willing to follow through on promised rewards, leading to low worker effort. In profit-maximizing equilibria, the firm prioritizes repaying its debts, leading to gradual increases in effort and wages. These dynamics can persist even after debts have been fully repaid. Consistent with this analysis, we document that a firm's financial leverage is negatively related to measures of employee morale, wages, and productivity.