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Overtime Working and Contract Efficiency

  • Hart, Robert A.


    (University of Stirling)

  • Ma, Yue


    (City University of Hong Kong)

We present a wage-hours contract designed to minimize costly job turnover given investments in on the job training combined with firm and worker information asymmetries. It may be optimal for the parties to work 'long hours' remunerated at premium rates for guaranteed overtime hours. Based on British plant and machine operatives, we test three predictions. First, trained workers with longer job tenure are more likely to work overtime. Second, hourly overtime pay exceeds the value of marginal product while the basic hourly wage is less than the value of marginal product. Third, the basic hourly wage is negatively related to the overtime premium.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7560.

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Length: 33 pages
Date of creation: Aug 2013
Date of revision:
Handle: RePEc:iza:izadps:dp7560
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  1. Hart, Robert A. & Ma, Yue, 2010. "Wage-hours contracts, overtime working and premium pay," Labour Economics, Elsevier, vol. 17(1), pages 170-179, January.
  2. David N. F. Bell & Robert A. Hart, 2003. "Wages, Hours, and Overtime Premia: Evidence from the British Labor Market," ILR Review, Cornell University, ILR School, vol. 56(3), pages 470-480, April.
  3. Lorne Carmichael, 1981. "Firm-Specific Human Capital and Promotion Ladders," Working Papers 452, Queen's University, Department of Economics.
  4. Robert Gibbons & Michael Waldman, 2004. "Task-Specific Human Capital," American Economic Review, American Economic Association, vol. 94(2), pages 203-207, May.
  5. Katharine G. Abraham & Henry S. Farber, 1988. "Returns to seniority in union and nonunion jobs: A new look at the evidence," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 42(1), pages 3-19, October.
  6. Trejo, Stephen J, 1991. "The Effects of Overtime Pay Regulation on Worker Compensation," American Economic Review, American Economic Association, vol. 81(4), pages 719-40, September.
  7. Hashimoto, Masanori, 1981. "Firm-Specific Human Capital as a Shared Investment," American Economic Review, American Economic Association, vol. 71(3), pages 475-82, June.
  8. repec:oup:restud:v:54:y:1987:i:3:p:437-59 is not listed on IDEAS
  9. repec:oup:qjecon:v:109:y:1994:i:1:p:1-25 is not listed on IDEAS
  10. Kinoshita, Tomio, 1987. "Working Hours and Hedonic Wages in the Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1262-77, December.
  11. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  12. Masanori Hashimoto & Ben T. Yu, 1980. "Specific Capital, Employmemt Contracts, and Wage Rigidity," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 536-549, Autumn.
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