Organization differ in the degree to which they differentiate employees by ability. We analyse how the effect of differentiation on employee morale may explain this variation. By comparing employees using ordinary talk, a manager boosts the self-image of some, but hurts that of others. Whether...

An important role of managers is to motivate subordinates. Monetary rewards have been the focus of economic analysis. Managers also use other means to influence subordinates. If a manager can better assess the subordinate's ability than the subordinate himself, and if ability and effort are...

Several economists have directed our attention to a finding in the social psychological literature that extrinsic motivation may undermine intrinsic motivation. The self-perception (SP) theory developed by Bem (1972) explains this finding. The crux of this theory is that people remember their...

We develop a theory of leadership that focuses on the role managers play in motivating employees through their attitude towards employees. We model a manager's attitude as her perception about employees' abilities of successfully completing challenging tasks. We show that a positive attitude...