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A Test for Moral Hazard in the Labor Market: Contractual Arrangements, Effort, and Health


  • Foster, Andrew D
  • Rosenzweig, Mark R


Moral hazard plays a central role in many models depicting contractual relationships involving worker effort. The authors show how time-series information on worker health, consumption, and work time can be used to measure the effort effects of payment schemes. Estimates from longitudinal data describing farming rural households indicate that time-wage payment schemes and share-tenancy contracts reduce effort compared to piece-rate payment schemes and on-farm employment. The evidence also indicates, consistent with moral hazard, that the same workers consume more calories under a piece-rate payment scheme or in on-farm employment than when employed for time wages. Copyright 1994 by MIT Press.

Suggested Citation

  • Foster, Andrew D & Rosenzweig, Mark R, 1994. "A Test for Moral Hazard in the Labor Market: Contractual Arrangements, Effort, and Health," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 213-227, May.
  • Handle: RePEc:tpr:restat:v:76:y:1994:i:2:p:213-27

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    References listed on IDEAS

    1. Montgomery, Edward & Shaw, Kathryn & Benedict, Mary Ellen, 1992. "Pensions and Wages: An Hedonic Price Theory Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 111-128, February.
    2. Simon, Julian L, 1990. "Great and Almost-Great Magnitudes in Economics," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 149-156, Winter.
    3. Kotlikoff, Laurence J. & Smith, Daniel E., 1984. "Pensions in the American Economy," National Bureau of Economic Research Books, University of Chicago Press, edition 0, number 9780226451466.
    4. Robert P. Inman & David J. Albright, 1987. "Central Policies for Local Debt: The Case of Teacher Pensions," NBER Working Papers 2166, National Bureau of Economic Research, Inc.
    5. Ehrenberg, Ronald G. & Schwarz, Joshua L., 1987. "Public-sector labor markets," Handbook of Labor Economics,in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 22, pages 1219-1260 Elsevier.
    6. Robert P. Inman, 1985. "The Funding Status of Teacher Pensions: An Econometric Approach," NBER Working Papers 1727, National Bureau of Economic Research, Inc.
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