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Fixed-wages, wage differentials and worker heterogeneities

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  • CARLIER G.
  • GAUMONT D.

Abstract

We study incentive‐compatible labour contracts in the case where individual productivity, preference for leisure and time preference rate are unobservable by the principal in a two‐period model. We first reduce this three‐dimensional problem to a standard one‐dimensional screening problem. Features of second‐best labour contracts provide a rationale for both fixed‐wages and wage differentials.
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  • Carlier G. & Gaumont D., 2005. "Fixed-wages, wage differentials and worker heterogeneities," Working Papers ERMES 0514, ERMES, University Paris 2.
    • Handle: RePEc:erm:papers:0514
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    File URL: http://ermes.u-paris2.fr/doctrav/0514
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