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The opening chapter of the thesis reviews efficiency wage literature. After considering the theoretical justifications that have been offered for a link from wages to effort, which is at the heart of efficiency wage theory, the chapter continues with an account of the attempts made so far in the literature to test this theory. The first of two empirical chapters examines how effort varies across individual characteristics. The efficiency wage link between individuals' earnings and their effort is investigated in a two-stage least squares framework, to allow for the endogeneity of earnings. Further tests check for the existence of a reverse causality argument. The chapter ends with an investigation into the effect of local unemployment rates on effort. A second empirical chapter examines the effect of workplace characteristics on effort. The influence of trade unions is considered by examining whether management policies to elicit effort from their employees, for example raising the cost of job loss or human resource management techniques, have differential effects on effort according to the degree of unionisation of the workplace. The final chapter is theoretical, considering group norms for effort, whereby the effort choice of individuals is influenced by their colleagues at work. Under the assumption that if a firm observes a single worker shirking, all members of that individual's workgroup will receive a sanction or lose a reward, the effort equilibrium of the workgroup is derived as a non-cooperative Nash equilibrium in expectations and effort choices. Given this equilibrium, the analysis continues by examining whether or not it would be in the workgroup's interest to establish a group norm for supplying effort. Thus the chapter provides a theoretical justification for the existence of, and adherence to, group norms for effort, which has been absent from previous analyses which have included such a concept.

There is little economic theory that supports designing compensation packages to include a market-traded component. Any contract based on tradable securities can potentially be replicated with non-tradable securities that would give the employer tighter control on the incentives and trading activities of the employee. Indeed, it seems paradoxical to compensate employees with tradable securities only to impose restrictions that prohibit them from taking advantage of the tradability feature. This thesis provides insights into the role and economic consequences of disclosures aimed at reducing the ability of employees to gain from insider trading. To analyze the impact of compensating employees with tradable securities I use a principal-agent framework where insider trading is captured by the notion of contract renegotiation. In the first analytical piece I show that in certain situations allowing the agent to trade anonymously on his private information increases production and, more importantly, is socially desirable compared to the case where the agent's trades are required to be publicly disclosed. The intuition for this result is that the bid-ask spread imposed by the market maker makes it costly for the agent to sell his shares and get full insurance if he shirks. The consequence of the positive incentive effects for the agent makes the overall economy better off. In the second version of my model I attempt to capture the SEC notion of insider trading where a manager has material non-public information prior to trading his equity claims. In this piece I allow the agent to collect private information prior to his trading. I identify three information structures and compare the production in the economy where the agent gathers private information prior to trading, to a scenario where private information acquisition is prohibited. I show that it is not at all clear-cut that private information collection by employees is always detrimental to the firm. Rather, situations may arise where private information collection and insider trading by employees results in higher production in the economy and can be socially desirable. Hence the thesis attempts to provide some potential economic reasons for employees to be compensated with tradable securities.

The problem of the migration of talent from developed countries is not a new one, andessentially it is understood that the reward systems of the countries involved are at faultin not providing individuals with rewards that they value. In the Sultanate of Oman,such a brain drain is not yet a problem, but over the last few years there has been anincreasing departure of talented people from the Omani Government Sector, as theprivate sector has more to offer. Such a phenomenon is wasteful in respect of thetraining investment which might have been made in these people, but it is alsodamaging to the government sector as a whole since the aim of providing qualityservices to the nation is made more difficult to achieve as employees of high calibreleave. Consequently, this thesis explores the issue of why people resign from the governmentsector to work elsewhere, and in so doing it focuses on the current reward system withinthe sector. Through a comprehensive literature review, it considers both academic andpractitioner perspectives on the issue of reward, concentrating particularly on theconcept of Total Reward which embraces the notion of a mixture of wide-rangingtangible and intangible rewards that are designed with employee involvement to ensuretheir attractiveness, and to ultimately secure loyalty and reduce employee turnover. The study then conducts an empirical exercise in which a large sample of governmentemployees from the full range of ministries where resignations are taking place,participate in a questionnaire survey, seeking to establish their views on the currentreward system and the potential for the introduction of a Total Reward strategy. Additionally, a number of in-depth interviews are held with employees, and focusgroups are also conducted, as a means of securing a third source of empiricalinformation. The data obtained is triangulated to establish a detailed employerperspective, and then considered in the light of the literature. The finding is that the reward system in its current form is not appropriate since it doesnot cater for employees' needs. It is characterised by a lack of rigorous and transparentcriteria on which to assess employees' eligibility for various rewards, and consequently,has allowed favouritism and nepotism to creep into a system that was intended to beoperated on the basis of merit. This is dispiriting for employees who have no faith intheir managers to determine their individual performance, and hence offer rewards on afair basis. It is concluded that a Total Reward strategy is a desirable way forward since this wouldstem the flow of talented people from the government sector, but it is alsoacknowledged that there are critical success factors associated with the implementationof such an initiative and that for these to be in place, a culture change within thegovernment sector would need to occur.