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| Author: | Acemoglu, D. Newman, A. F. |
| Title: | The labor market and corporate structure |
| Journal: | European Economic Review
2002 : DEC, VOL. 46:10, p. 1733-1756 |
| Index terms: | CORPORATE STRUCTURE EFFICIENCY-WAGE MODELS LABOUR MARKETS MORAL HAZARD |
| Language: | eng |
| Abstract: | The authors analyze the impact of labor demand and labor market regulations on the corporate structure of firms. Higher wages are associated with lower monitoring, irrespective of whether these high wages are caused by labor market regulations, unions or higher labor demand. The authors also find that the organization of firms has important macroeconomic implications. In particular, monitoring is a type of "rent-seeking" activity and the decentralized equilibrium spends excessive resources on monitoring. Labor market regulations that reduce monitoring by pushing wages up may increase net output or reduce it only by a small amount even though they reduce employment. |
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