Wage Floors and Optimal Job Design
We analyze the effects of lower bounds on wages, e.g., minimum wages or liability limits, on job design within firms. In our model, two tasks contribute to non-verifiable firm value and affect an imperfect performance measure. The tasks can be assigned to either one or two agents. In the absence of a wage floor, it is optimal to assign the tasks to different agents whenever the agents' reservation utility is not too large. Under such a job design, the principal can tailor incentives according to each task's marginal productivity. By contrast, with a relatively large wage floor, the principal gradually lowers effort incentives to avoid rent payments to the agents, even before the wage floor exceeds the agents' reservation utility. If the wage floor is sufficiently large, the principal hires only one agent even though this leads to a distortion of effort across tasks or the non-execution of one task altogether.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.socialpolitik.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.:
- Demougin, Dominique & Fluet, Claude, 2001. "Monitoring versus incentives," European Economic Review, Elsevier, vol. 45(9), pages 1741-1764, October.
- George Baker, 2002. "Distortion and Risk in Optimal Incentive Contracts," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 728-751.
- Portugal, Pedro & Cardoso, Ana Rute, 2002.
"Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations,"
IZA Discussion Papers
544, Institute for the Study of Labor (IZA).
- Pedro Portugal & Ana Rute Cardoso, 2006. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 988-1013, 09.
- Itoh, Hideshi, 2001.
"Job design and incentives in hierarchies with team production,"
Hitotsubashi Journal of commerce and management,
Hitotsubashi University, vol. 36(1), pages 1-17, January.
- Itoh, H., 1996. "Job Design and Incentives in Hierarchies with Team Production," ISER Discussion Paper 0403, Institute of Social and Economic Research, Osaka University.
- Marisa Ratto & Wendelin Schnedler, 2004.
"Too Few Cooks Spoil The Broth,"
Royal Economic Society Annual Conference 2004
154, Royal Economic Society.
- Janet Currie & Bruce C. Fallick, 1996.
"The Minimum Wage and the Employment of Youth Evidence from the NLSY,"
Journal of Human Resources,
University of Wisconsin Press, vol. 31(2), pages 404-428.
- Janet Currie & Bruce Fallick, 1993. "The Minimum Wage and the Employment of Youth: Evidence from the NLSY," NBER Working Papers 4348, National Bureau of Economic Research, Inc.
- Lewis, Tracy R & Sappington, David E M, 2000. "Contracting with Wealth-Constrained Agents," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(3), pages 743-67, August.
- Patrick W. Schmitz, 2005.
"Allocating control in agency problems with limited liability and sequential hidden actions,"
Bonn Econ Discussion Papers
bgse27_2005, University of Bonn, Germany.
- Patrick W. Schmitz, 2005. "Allocating Control in Agency Problems with Limited Liability and Sequential Hidden Actions," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 318-336, Summer.
- Schmitz, Patrick W, 2005. "Allocating Control in Agency Problems with Limited Liability and Sequential Hidden Actions," CEPR Discussion Papers 5145, C.E.P.R. Discussion Papers.
- Alan Manning, 2010.
"Imperfect Competition in the Labour Market,"
CEP Discussion Papers
dp0981, Centre for Economic Performance, LSE.
- Anja Schöttner, 2008. "Relational Contracts, Multitasking, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(1), pages 138-162, May.
- Card, David & Krueger, Alan B, 1994.
"Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,"
American Economic Review,
American Economic Association, vol. 84(4), pages 772-93, September.
- David Card & Alan B. Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," NBER Working Papers 4509, National Bureau of Economic Research, Inc.
- Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
- Arindrajit Dube & T. William Lester & Michael Reich, 2010.
"Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties,"
The Review of Economics and Statistics,
MIT Press, vol. 92(4), pages 945-964, November.
- Dube, Andrajit & Lester, T. William & Reich, Michael, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," Institute for Research on Labor and Employment, Working Paper Series qt86w5m90m, Institute of Industrial Relations, UC Berkeley.
- Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 318-50, April.
- Wendelin Schnedler, 2008. "When Is It Foolish to Reward for A While Benefiting from B?," Journal of Labor Economics, University of Chicago Press, vol. 26(4), pages 595-619, October.
- Alan B. Krueger & David Card, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply," American Economic Review, American Economic Association, vol. 90(5), pages 1397-1420, December.
- Sappington, David, 1983. "Limited liability contracts between principal and agent," Journal of Economic Theory, Elsevier, vol. 29(1), pages 1-21, February.
- Tracy R. Lewis & David E. M. Sappington, 2001. "Optimal Contracting with Private Knowledge of Wealth and Ability," Review of Economic Studies, Oxford University Press, vol. 68(1), pages 21-44.
- Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
- Park, Eun-Soo, 1995. "Incentive Contracting under Limited Liability," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 477-90, Fall.
- Laux, Christian, 2001. "Limited-Liability and Incentive Contracting with Multiple Projects," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 514-26, Autumn.
- Itoh, Hideshi, 1994. "Job design, delegation and cooperation: A principal-agent analysis," European Economic Review, Elsevier, vol. 38(3-4), pages 691-700, April.
When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc11:48731. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.