When Galatea cares about her Reputation: How having Faith in your Workers reduces their Motivation to shine

This discussion paper led to a publication in the <I>European Economic Review</I> (2013). Vol. 60, pp. 91-104.<P> We develop a theory of leadership that focuses on the role managersplay in motivating employees through their attitude towards employees. We modela manager's attitude as her perception about employees' abilities of successfullycompleting challenging tasks. We show that a positive attitude motivates employeeswho are driven by monetary rewards. A negative attitude may motivate employeeswho are driven by concerns about their reputation for being able. When employeesare driven by monetary rewards and care about their reputations, an increase inthe reward for successfully completing challenging tasks may lead employees to shyaway from these tasks.