IDEAS home Printed from https://ideas.repec.org/a/ier/iecrev/v34y1993i3p503-24.html
   My bibliography  Save this article

A Model of Efficiency Wages as a Signal of Firm Value

Author

Listed:
  • Arvan, Lanny
  • Esfahani, Hadi Salehi

Abstract

We consider performance contracts with firm private information. The verifiable components of the contract, an up-front wage and employment, may serve both as a signal and a performance incentive. Job rent may be necessary for signaling and, since efficient signaling is multidimensional, there is an inextricable link between job rent and underemployment. Signaling can explain the lack of explicit bonding in actuality. Though our basic model is static, our underemployment result is not a consequence of firm myopia. When the firm is farsighted, it will not maximize the joint future surplus if it cannot extract the worker's share at present. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Arvan, Lanny & Esfahani, Hadi Salehi, 1993. "A Model of Efficiency Wages as a Signal of Firm Value," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 503-524, August.
  • Handle: RePEc:ier:iecrev:v:34:y:1993:i:3:p:503-24
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0020-6598%28199308%2934%3A3%3C503%3AAMOEWA%3E2.0.CO%3B2-4&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. André Zylberberg, 1994. "Effort et contrats : quelques enseignements concernant le marché du travail," Économie et Prévision, Programme National Persée, vol. 113(2), pages 1-20.
    2. Vahey, Shaun P., 2004. "Signalling ability to pay and rent sharing dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 28(11), pages 2327-2339, October.
    3. Esfahani, Hadi Salehi & Mookherjee, Dilip, 1995. "Productivity, contracting modes, and development," Journal of Development Economics, Elsevier, vol. 46(2), pages 203-231, April.
    4. Esfahani, Hadi Salehi, 2000. "Institutions and government controls," Journal of Development Economics, Elsevier, vol. 63(2), pages 197-229, December.
    5. Pierre Cahuc & André Zylberberg, 1994. "Que reste-t-il de la théorie du salaire d'efficience ?," Revue Économique, Programme National Persée, vol. 45(3), pages 385-398.

    More about this item

    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:ier:iecrev:v:34:y:1993:i:3:p:503-24. 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: (Wiley-Blackwell Digital Licensing) or (). General contact details of provider: http://edirc.repec.org/data/deupaus.html .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.