Ownership, Agency and Wages: An Examination in the Fast Food Industry
Alan B. Krueger
This paper estimates the difference in compensation between company-owned
and franchisee-owned fast food restaurants. The contrast is of interest
because contractual arrangements give managers of company-owned outlets less of
an incentive to monitor and supervise employees. Estimates based on two data
sets suggest that employee compensation is slightly greater at company-owned
outlets than franchisee-owned outlets. The earnings gap is 9 percent for
assistant and shift managers and 2 percent for full-time crew workers.
Furthermore. the tenure-earnings profile is steeper at company-owned
restaurants. These findings suggest that monitoring difficulties influence the
timing and generosity of compensation.
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