Shirking and the choice of technology: a theory of production inefficiencywith an empirical application

We develop a model of shirking and technology choice and show that organiza tions exercising less effective direct control over shirking adopt technolo gies that underutilize the workforce to a greater degree relative to neocla ssical counterparts in order to control shirking indirectly. Thus technical inefficiency arises endogenously as a rational response to allocative inef ficiency caused by shirking. An empirical analysis of data from a sample of collective and private farms operating in Jewish Palestine reveals the pre sence of shirking, and supports the prediction that farms with less effecti ve direct control over shirking exhibit greater labor hoarding as a manifes tation of technical inefficiency. (C) 2001 Elsevier Science B.V. All rights reserved.