Incentive Contracts And Total Factor Productivity
We propose a transactions cost theory of total factor productivity (TFP). In a world with asymmetric information and transactions costs, productivity must be induced by incentive schemes. Labor contracts trade off marginal benefits and costs of effort. The latter include, in addition to the workers' marginal disutility of effort, organizational costs and rents. As the economy grows, contracts change endogenously, inducing higher effort and productivity. Transactions costs are also affected by societal characteristics that determine the power of incentives. Differences in these characteristics may explain cross-economy productivity differences. Numerical experiments demonstrate the model's consistency with time-series and cross-country observations. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.
Volume (Year): 47 (2006)
Issue (Month): 3 (08)
|Contact details of provider:|| Postal: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297|
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
|Order Information:|| Web: http://www.blackwellpublishing.com/subs.asp?ref=0020-6598 Email: |
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.:
- Demougin, Dominique & Fluet, Claude, 2001. "Monitoring versus incentives," European Economic Review, Elsevier, vol. 45(9), pages 1741-1764, October.
- Dominique Demougin & Claude Fluet, 1996.
"Mechanism Sufficient Statistic in the Risk-Neutral Agency Problem,"
Cahiers de recherche du Département des sciences économiques, UQAM
9602, Université du Québec à Montréal, Département des sciences économiques.
- Dominique Demougin & Claude Fluet, 1998. "Mechanism Sufficient Statistic in the Risk-Neutral Agency Problem," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(4), pages 622-, December.
- Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
- Prescott, Edward C, 1998.
"Needed: A Theory of Total Factor Productivity,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
- Edward C. Prescott & Stephen L. Parente, 1999.
"Monopoly Rights: A Barrier to Riches,"
American Economic Review,
American Economic Association, vol. 89(5), pages 1216-1233, December.
- Paul R. Milgrom, 1981.
"Good News and Bad News: Representation Theorems and Applications,"
Bell Journal of Economics,
The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
- Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
- Shi, Shouyong, 1998.
"Search for a Monetary Propagation Mechanism,"
Journal of Economic Theory,
Elsevier, vol. 81(2), pages 314-352, August.
- Narayana R. Kocherlakota, 2001. "Building blocks for barriers to riches," Staff Report 288, Federal Reserve Bank of Minneapolis.
When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:47:y:2006:i:3:p:1033-1055. 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 ()
If references are entirely missing, you can add them using this form.