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The Ratchet Effect and the Market for Second-Hand Workers

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  • Macleod, W.B.
  • Kenemoto, Y.

Abstract

Workers in a long-term relationship often have an incentive to hide their ability early in the relationship to avoid having the firm increase the level of output expected from them in the future. The authors show that competition for older workers will permit the implementation of efficient piece-rate contracts. When the difficulty of the job is unobserved by the firm, Robert Gibbons (1987) has shown that all piece-rate contracts will be inefficient. Together, these results may explain why piece rates are common in some jobs, such as agricultural work and sales, and not as popular for many manufacturing jobs. Copyright 1992 by University of Chicago Press.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Macleod, W.B. & Kenemoto, Y., 1990. "The Ratchet Effect and the Market for Second-Hand Workers," Cahiers de recherche 9027, Universite de Montreal, Departement de sciences economiques.
  • Handle: RePEc:mtl:montde:9027
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    Keywords

    Labour Market ; Contracts ; Comtition;

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