Firm-Specific Human Capital and Promotion Ladders
AbstractThis article shows that contracts which make workers' wages depend on their seniority level as well as their length of service can induce optimal turnover in the presence of transactions costs and investments in specific capital. Other arrangements which are shown to be inferior include Becker's standard sharing contract and contracts which embody explicit separation penalties. The optimal wage profile is derived and it corresponds to those we observe.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 452.
Date of creation: 1981
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