IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/1708.html
   My bibliography  Save this paper

The Labour Market and Corporate Structure

Author

Listed:
  • Acemoglu, Daron
  • Newman, Andrew

Abstract

This paper analyses the impact of labour demand and labour market regulations on the corporate structure of fims. It finds that higher wages are associated with lower monitoring, irrespective of whether these high wages are caused by labour market regulations, unions or higher labour demand. These comparative static results are in line with the broad trends in the data. The paper also finds 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. Labour 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.

Suggested Citation

  • Acemoglu, Daron & Newman, Andrew, 1997. "The Labour Market and Corporate Structure," CEPR Discussion Papers 1708, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1708
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1708
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lawrence F. Katz & Gary W. Loveman & David G. Blanchflower, 1995. "A Comparison of Changes in the Structure of Wages in Four OECD Countries," NBER Chapters, in: Differences and Changes in Wage Structures, pages 25-66, National Bureau of Economic Research, Inc.
    2. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, vol. 89(5), pages 1259-1278, December.
    3. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    4. Richard B. Freeman & Edward P. Lazear, 1995. "An Economic Analysis of Works Councils," NBER Chapters, in: Works Councils: Consultation, Representation, and Cooperation in Industrial Relations, pages 27-52, National Bureau of Economic Research, Inc.
    5. Calvo, Guillermo A & Wellisz, Stanislaw, 1979. "Hierarchy, Ability, and Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 991-1010, October.
    6. HOLMSTROM, Bengt, 1979. "Moral hazard and observability," LIDAM Reprints CORE 379, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Legros, Patrick & Newman, Andrew F., 1996. "Wealth Effects, Distribution, and the Theory of Organization," Journal of Economic Theory, Elsevier, vol. 70(2), pages 312-341, August.
    8. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
    9. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, March.
    10. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
    11. James B. Rebitzer & Lowell J. Taylor, 1991. "A Model of Dual Labor Markets When Product Demand Is Uncertain," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1373-1383.
    12. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
    13. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    14. Robert Gibbons, 1996. "Incentives and Careers in Organizations," NBER Working Papers 5705, National Bureau of Economic Research, Inc.
    15. Freeman, Richard B. & Katz, Lawrence F. (ed.), 1995. "Differences and Changes in Wage Structures," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226261607, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    2. Uwe Jirjahn & Kornelius Kraft, 2010. "Teamwork And Intra‐Firm Wage Dispersion Among Blue‐Collar Workers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(4), pages 404-429, September.
    3. Dennis J. Snower, 1998. "Causes of changing earnings inequality," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 69-133.
    4. Albanese, Marina & Navarra, Cecilia & Tortia, Ermanno C., 2015. "Employer moral hazard and wage rigidity. The case of worker owned and investor owned firms," International Review of Law and Economics, Elsevier, vol. 43(C), pages 227-237.
    5. Edward P. Lazear, 1995. "Personnel Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121883, December.
    6. Rebitzer, James B. & Taylor, Lowell J., 2011. "Extrinsic Rewards and Intrinsic Motives: Standard and Behavioral Approaches to Agency and Labor Markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 8, pages 701-772, Elsevier.
    7. Michael Waldman, 2012. "Theory and Evidence in Internal LaborMarkets [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    8. Jeff Borland, 2000. "Economic Explanations of Earnings Distribution Trends in the International Literature and Application to New Zealand," Treasury Working Paper Series 00/16, New Zealand Treasury.
    9. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    10. Alan Carruth & Bill Collier & Andy Dickerson, 1999. "Inter-industry Wage Differences and Individual Heterogeneity: How Competitive is Wage Setting in the UK?," Studies in Economics 9914, School of Economics, University of Kent.
    11. David Kucera, 2001. "Foreign Trade of Manufactures and Men and Women's Employment and Earnings in Germany and Japan," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(2), pages 129-149.
    12. Quintero Jaramillo, Jose E., 2004. "Moral hazard in teams with limited punishments and multiple outputs," DEE - Working Papers. Business Economics. WB wb040705, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    13. Snower, Dennis J., 1999. "Inequality of Earnings," CEPR Discussion Papers 2321, C.E.P.R. Discussion Papers.
    14. John G. Sessions & Nikolaos Theodoropoulos, 2014. "Tenure, Wage Profiles and Monitoring," Research in Labor Economics, in: New Analyses of Worker Well-Being, volume 38, pages 105-162, Emerald Group Publishing Limited.
    15. Mariano Tommasi & Federico Weinschelbaum, 2007. "Principal-Agent Contracts under the Threat of Insurance," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(3), pages 379-393, September.
    16. MacLeod, W Bentley & Malcomson, James M & Gomme, Paul, 1994. "Labor Turnover and the Natural Rate of Unemployment: Efficiency Wage versus Frictional Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 276-315, April.
    17. Åsa Rosén & Etienne Wasmer, 2005. "Higher Education Levels, Firms’ Outside Options and the Wage Structure," LABOUR, CEIS, vol. 19(4), pages 621-654, December.
    18. John T. Addison & Douglas A. Fox & Christopher J. Ruhm, 2000. "Technology, Trade Sensitivity, and Labor Displacement," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 682-699, January.
    19. Jean-Louis Bago & Bruce Shearer, 2022. "Risk preferences and contract choices," Experimental Economics, Springer;Economic Science Association, vol. 25(5), pages 1374-1398, November.
    20. David Weisstanner & Klaus Armingeon, 2018. "How Redistributive Policies Reduce Market Inequality: Education Premiums in 22 OECD Countries," LIS Working papers 735, LIS Cross-National Data Center in Luxembourg.
    21. Uwe Jirjahn, 2006. "A Note on Efficiency Wage Theory and Principal–Agent Theory," Bulletin of Economic Research, Wiley Blackwell, vol. 58(3), pages 235-252, July.

    More about this item

    Keywords

    Corporate Structure; Efficiency Wages; Labour Market Regulation; Monitoring; Moral Hazard;
    All these keywords.

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:1708. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.