IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/19688.html

When Should a Firm Employ its Workers? A Relational Contracting Approach

Author

Listed:
  • Schöttner, Anja
  • Upton, Harvey

Abstract

A principal hiring an agent chooses between employment and self-employment. Under employment, the principal can control the manner in which the agent performs the assignment (the ‘work design’), whereas this is legally forbidden under self-employment. Due to incomplete contracts, the relationship is governed by relational agreements, which are influenced by the allocation of control. We show that employment typically results in an over-demanding work design, compared to an under-demanding work design under self-employment, and that employment relationships are more rigid and better suited to favorable production environments. We further examine the impact of taxation, minimum wages, and formal performance pay.

Suggested Citation

  • Schöttner, Anja & Upton, Harvey, 2024. "When Should a Firm Employ its Workers? A Relational Contracting Approach," CEPR Discussion Papers 19688, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19688
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP19688
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

    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:cpr:ceprdp:19688. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.