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Credit, Incentives, and Reputation: A Hedonic Analysis of Contractual Wage Profiles

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  • Brandt, Loren
  • Hosios, Arthur J

Abstract

A hedonic analysis of principal-agent employment contracts is developed, in which workers and employers exchange labor services and contractual payment patterns, and is applied to contract data from a household-level survey in rural China in 1935. The results indicate that credit-market constraints motivated workers' and employers' contract choices; that shirking by workers rather than by employers was the dominant incentive issue; that reputational concerns rather than threats of termination were the key worker-disciplining device; and, finally, that a contract's third party acted as an enforcement device rather than as a matchmaker. Copyright 1996 by University of Chicago Press.

Suggested Citation

  • Brandt, Loren & Hosios, Arthur J, 1996. "Credit, Incentives, and Reputation: A Hedonic Analysis of Contractual Wage Profiles," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1172-1226, December.
    • Handle: RePEc:ucp:jpolec:v:104:y:1996:i:6:p:1172-1226
    DOI: 10.1086/262057
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    2. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2013. "Credit within the Firm," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(1), pages 211-247.
    3. Loren Brandt & Debin Ma & Thomas G. Rawski, 2014. "From Divergence to Convergence: Reevaluating the History behind China's Economic Boom," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 45-123, March.
    4. Federico Etro & Silvia Marchesi & Laura Pagani, 2015. "The Labor Market In The Art Sector Of Baroque Rome," Economic Inquiry, Western Economic Association International, vol. 53(1), pages 365-387, January.
    5. Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June.
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    8. Loren Brandt & Arthur J. Hosios, 2010. "Interest-Free Loans between Villagers," Economic Development and Cultural Change, University of Chicago Press, vol. 58(2), pages 345-372, January.

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