Job matching when employment contracts suffer from moral hazard
We consider a job matching model where the relationships between firms and wealth-constrained workers suffer from moral hazard. Specifically, effort on the job is non-contractible so that parties that are matched negotiate a bonus contract. Higher unemployment benefits affect the workers' outside option. The latter is improved for low-skilled workers. Hence they receive a larger share of the surplus, which strengthens their effort incentives and increases productivity. Effects are reversed for high-skilled workers. Moreover, raising benefit payments affects the proportion of successful matches, which induces some firms to exit the economy and causes unemployment to increase.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pitchford, Rohan, 1998. "Moral hazard and limited liability: The real effects of contract bargaining," Economics Letters, Elsevier, vol. 61(2), pages 251-259, November.
- Pierre Cahuc & AndrÃ© Zylberberg, 2004.
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 026203316x, December.
- Pierre Cahuc & Stéphane Carcillo & André Zylberberg, 2014. "Labor Economics," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01076752, HAL.
- Pierre Cahuc & Stéphane Carcillo & André Zylberberg, 2014. "Labor Economics," Sciences Po publications info:hdl:2441/1oclgdahv98, Sciences Po.
- Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, 07.
- Susanne Ohlendorf & Patrick W. Schmitz, 2012.
"Repeated Moral Hazard And Contracts With Memory: The Case Of Risk‐Neutrality,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 433-452, 05.
- Ohlendorf, Susanne & Schmitz, Patrick W., 2011. "Repeated moral hazard and contracts with memory: The case of risk-neutrality," MPRA Paper 28823, University Library of Munich, Germany.
- Goerke, Laszlo, 2000. "On the structure of unemployment benefits in shirking models," Labour Economics, Elsevier, vol. 7(3), pages 283-295, May.
- Albert van der Horst, 2003.
"Structural estimates of equilibrium unemployment in six OECD economies,"
CPB Discussion Paper
19, CPB Netherlands Bureau for Economic Policy Analysis.
- Albert van der Horst, 2003. "Structural Estimates of Equilibrium Unemployment in Six OECD Economies," Economics Working Papers 022, European Network of Economic Policy Research Institutes.
- Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
- Rogerson, William P, 1985. "The First-Order Approach to Principal-Agent Problems," Econometrica, Econometric Society, vol. 53(6), pages 1357-67, November.
- Dominique Demougin & Carsten Helm, 2006. "Moral Hazard and Bargaining Power," German Economic Review, Verein für Socialpolitik, vol. 7, pages 463-470, November.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:55:y:2011:i:7:p:964-979. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.