Is it really hard to motivate those who are not highly educated? Empirical evidence from a semi-parametric analysis

In this study, we estimate the principal-agent model of moral hazard using a semi-parametric estimation method. We estimate the principal-agent model of moral hazard using longitudinal data on firms and managerial compensation collected from the database of Beijing Juyuan Ruisi Data Technology Corporation Limited, called RESSET. The estimated primitives in the contracting model show that most managers with high school and master educations have significantly higher costs of moral hazard than managers with university and doctor educations. Managers with high school and master educations are harder to motivate because they lack the knowledge to fulfill the delegated tasks.