Worker Morale and Effort: Is the Relationship Causal?

We investigate a unique setting which enables us to distinguish
between two theories of work performance. A standard labor supply
framework implies a negative effect of the nonpecuniary cost of work
on the employees effort. In contrast, a model of worker morale that is
consistent with a widely used theory of Akerlof and Yellen (QJE,
1990) predicts this negative effect is stronger (weaker) for low-morale
(high-morale) workers. We exploit a natural experiment design of a
firm relocation from Milwaukees Central Business District to the
areas suburban ring in 1992. There is an exogenous source of variation
on the adjusted commuting distance among those who stay at the
firm. Some workers received a windfall gain, whereas other workers
experienced an unforeseen cost in longer commuting time. The estimates
suggest that low-morale workers are responsive to the shock in
commuting time for some of the dimensions of morale. We conclude
that the results give some indication of the model of worker morale.