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Author: | Moen, E.R. Rosén, Å. |
Title: | Equilibrium incentive contracts and efficiency wages |
Journal: | Journal of the European Economic Association
2006 : DEC, VOL. 4:6, p. 1165-1192 |
Index terms: | employment employees productivity incentives pay models |
Language: | eng |
Abstract: | This paper analyzes the optimal (efficiency) wage contract (hereafter as: wg-c./wg-cs.) when output is contractible but firms neither observe the workers' effort nor their match-specific productivity. Firms offer wg-cs. optimally trading off effort and wage costs. As a result, employed workers enjoy rents, which in turn creates unemployment (as: unempl). Nonetheless, the incentive power of the equilibrium wg-c. is constrained efficient in the absence of taxes and unempl. benefits etc. |
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