Book Series
Theories of the Firm
Fifth Edition
Demetri Kantarelis

Appendix VIII: Occupational stress: some microeconomic issues

PagesContents
335-349In an attempt to capture the essence of issues associated with occupational stress, some neo-classical microeconomic theoretical concepts are proposed along with a suggestion for a screening test as well as popular and professional press summaries that appear to justify the underlying logic of this paper. Firstly, assuming that stress is a factor of production and that the firm functions in an environment free of any regulation, a proposed model predicts that the profit maximising stress level (S*) is less than the stress level that maximises output. Additionally, reduction below S* may be achieved only if a firmís increase in cost for stress relief in the work place guarantees productivity and profit improvement in exchange for a reduction in employee health damages/costs due to stress. Moreover, assuming that a stress standard inside the firm can be identified, compliance with that standard by reallocating stress from one group of employees to another or from one production plant to another may contribute to a reduction in total damages to employees and/or to a reduction in total stress relief expenditures to the firm. Secondly, a regulated firm subject to a standard, decided upon outside the firm, may trigger unintended outcomes due to miss-estimation of that standard: if the standard is considerably less than S*, the firm may not have the incentive to comply. As stressed in the conclusion, beyond a certain point, stress and its measurement in the work place becomes very difficult to handle: how much of the observed stress is due to work or personal life and how interdependent are the two? How should a firm minimise problems associated with asymmetries in occupational stress information that may lead to hold up, adverse selection and moral hazard?
1 Introduction
1.1.1 Reality in the USA
1.1.2 Reality in the UK
2 Optimum stress without regulation
3 Sharing costs
4 Guided by a standard
4.1 Reallocation of stress within the firm
4.2 Stress relief for higher productivity and profit
4.3 Governmental regulation
5 Bayesian testing
6 Summary and conclusions
PagesContents
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