RESEARCH PAPER NO. 840

WHY DO SOCIAL SKILLS MATTER?

by

SUREN BASOV

MARCH 2002

Department of Economics. University of Melbourne. Melbourne Victoria 3010 Australia

ABSTRACT

In this paper I propose a model where social skills of a manager signal the workers that their effort is productive. In this model firms with a high productivity of effort hire a socially skilled manager and pay higher wages, and workers hired by these firms exert higher effort. In a broader context, the paper argues the employees are compensated with a higher wage and better working conditions for higher levels of effort.

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