Constraints on the Choice of Work Hours: Agency vs. Specific-Capital
Most models of implicit lifetime contracts imply that at any particular point in time, workers' wages and value of marginal product (VMP) will diverge. As a result, the contract will have to specify hours as well as wages, since firms will desire to prevent workers from working more when the wage is greater than VMP and from working less when the wage is less than VMP. this divergence, combined with the fact that in efficient contracts, the hours are set so that VMP equals the marginal value of leisure, implies that workers will face binding hours constraints. We show that the two major models of lifetime contracts, the agency model and the firm-specific capital model, make opposite predictions regarding the relation between work hours constraints and job tenure. We test these predictions. Our results indicate that neither model of efficient long-term contracts explains the observed pattern of hours constraints. Therefore, we briefly consider other explanations.
|Date of creation:||May 1987|
|Date of revision:|
|Publication status:||Published as "Constraints on the Choice of Work Hours: Agency Versus Specific-Capital", JHR, Vol. 27, no. 4 (1992): 661-678.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Poirier, Dale J. & Ruud, Paul A., 1981. "On the appropriateness of endogenous switching," Journal of Econometrics, Elsevier, vol. 16(2), pages 249-256, June.
- William T. Dickens & Shelly J. Lundberg, 1985.
"Hours Restrictions and Labor Supply,"
NBER Working Papers
1638, National Bureau of Economic Research, Inc.
- Lang, Kevin, 1989. "Why was there mandatory retirement?," Journal of Public Economics, Elsevier, vol. 39(1), pages 127-136, June.
- Martin Neil Baily, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Oxford University Press, vol. 41(1), pages 37-50.
- Dickens, William T & Lang, Kevin, 1985.
"A Test of Dual Labor Market Theory,"
American Economic Review,
American Economic Association, vol. 75(4), pages 792-805, September.
- S.G. Hall & S.G.B. Henry, 1987. "Wage Models," National Institute Economic Review, National Institute of Economic and Social Research, vol. 119(1), pages 70-75, February.
- Moffitt, Robert, 1984. "The Estimation of a Joint Wage-Hours Labor Supply Model," Journal of Labor Economics, University of Chicago Press, vol. 2(4), pages 550-66, October.
- Parsons, Donald O, 1972. "Specific Human Capital: An Application to Quit Rates and Layoff Rates," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1120-43, Nov.-Dec..
- Kuhn, Peter, 1986. "Wages, Effort, and Incentive Compatibility in Life-Cycle Employment Contracts," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 28-49, January.
- Kahn, Shulamit, 1987. "Occupational Safety and Workers Preferences: Is There a Marginal Worker?," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 262-68, May.
- Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
- John C. Ham, 1982. "Estimation of a Labour Supply Model with Censoring Due to Unemployment and Underemployment," Review of Economic Studies, Oxford University Press, vol. 49(3), pages 335-354.
- Robert E. Hall, 1980.
"The Importance of Lifetime Jobs in the U.S. Economy,"
NBER Working Papers
0560, National Bureau of Economic Research, Inc.
- Hall, Robert E, 1982. "The Importance of Lifetime Jobs in the U.S. Economy," American Economic Review, American Economic Association, vol. 72(4), pages 716-24, September.
- Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-91, December.
- Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2238. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.