Just-cause provisions, severance pay, and the efficiency wage hypothesis
A simple model of employment contracting is employed to examine the effectiveness of just-cause provisions in alleviating employer opportunism in two types of efficiency wage contracts-standard contracts, in which wages exceed the worker's marginal contribution, and deferred wages, which are paid after a period of tenure in the firm. It is argued that just-cause employment policies are necessary and sufficient to prevent employer opportunism when standard efficiency wages are utilized. However, just-cause policies are not sufficient to deter employer opportunism when employment contracts are of the delayed-payment type. In these contracts, other contractual provisions, such as severance provisions, are also necessary. Copyright © 2000 John Wiley & Sons, Ltd.
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Volume (Year): 21 (2000)
Issue (Month): 2 ()
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- Levine, David I, 1991. "Just-Cause Employment Policies in the Presence of Worker Adverse Selection," Journal of Labor Economics, University of Chicago Press, vol. 9(3), pages 294-305, July.
- Jacob Mincer & Boyan Jovanovic, 1981.
"Labor Mobility and Wages,"
NBER Chapters,in: Studies in Labor Markets, pages 21-64
National Bureau of Economic Research, Inc.
- Jacob Mincer & Boyan Jovanovic, 1979. "Labor Mobility and Wages," NBER Working Papers 0357, National Bureau of Economic Research, Inc.
- Hutchens, Robert, 1986. "Delayed Payment Contracts and a Firm's Propensity to Hire Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 4(4), pages 439-457, October.
- George J. Borjas, 1978. "Job Mobility and Earnings Over the Life Cycle," NBER Working Papers 0233, National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)
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