Author: Dominique Demougin Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
We consider a job matching model where the relationships between firms and wealth-constrained workers suffer from moral hazard. Specifically, effort on the job is non-contractible so that parties that are matched negotiate a bonus contract. Higher unemployment benefits affect the workers' outside option. The latter is improved for low skilled workers. Hence they receive a larger share of the surplus, which strengthens their effort incentives and increases productivity. Effects are reversed for high skilled labor. Moreover, raising benefit payments affects the proportion of successful matches which induces some firms to exit the economy and causes unemployment to increase.
Author: Espen R. Moen Publisher: ISBN: Category : Languages : en Pages : 42
Book Description
We analyze the interaction between intertemporal incentive contracts and search frictions associated with on-the-job search. In our model, agency problems call for wage contracts with deferred compensation. At the same time workers do on-the-job search. Deferred compensation improves workers' incentives to exert effort but distorts their on-the-job search decisions. We show that deferred compensation is less attractive when the value to the worker-firm pair of on-the-job search is high . Moreover, the interplay between search frictions and wage contracts creates feedback effects. If firms in equilibrium use contracts with deferred compensation, fewer firms with vacancies enter the on-the-job search market, and this in turn reduces the distortions created by deferred compensation. These feedback effects between the incentive contracts used and the activity level in the search markets may lead to multiple equilibria: a low-turnover equilibrium where firms use deferred compensation, and a high-turnover equilibrium where they do not. Furthermore, the model predicts that firms are more likely to use deferred compensation when search frictions are high and when the gains from on-the-job search are small.
Author: Donald O. Parsons Publisher: ISBN: Category : Languages : en Pages : 36
Book Description
Job displacement insurance typically includes both unemployment benefits and lump-sum severance pay, and each has provoked policy concerns. Unemployment insurance concerns have centered on distorted job search/offer acceptance decisions by the worker, severance-induced firing cost concerns on excessive labor hoarding by firms. A single period private contracting model is used to investigate the interaction of these two seemingly distinct issues. Viewed singly, familiar results emerge. The absence of separation benefits of any kind leads to excessive labor hoarding as a primitive form of earnings insurance. In a limited information environment, the distribution of job displacement insurance between the two benefit types becomes important. Unemployment insurance benefits must be limited (relative to first-best levels) and severance pay made more generous. Firing cost considerations are less familiar. Because the firm wants to provide benefits, they cannot be "contracted around." Although formally driven by the sum of (unsubsidized) severance pay and expected unemployment benefits, the second-best firing cost program limits severance pay only. Together the two constraints create an unpromising contracting environment. The firing cost constraint is the more easily relaxed by government action - subsidies of sufficient size to one or another of the separation programs will work. Offer acceptance requires restrictions on leisure (workfare). Unfortunately, if first-best benefits are mandated, efficiency requires that both be eased.
Author: Dale T. Mortensen Publisher: Oxford University Press, USA ISBN: 0199233780 Category : Business & Economics Languages : en Pages : 219
Book Description
A selection of key papers from the winners of the Nobel Memorial Prize 2010. It features their most important work on unemployment, labour market dynamics, and the equilibrium search model.
Author: Amy Finkelstein Publisher: Columbia University Press ISBN: 0231538685 Category : Medical Languages : en Pages : 161
Book Description
Addressing the challenge of covering heath care expenses—while minimizing economic risks. Moral hazard—the tendency to change behavior when the cost of that behavior will be borne by others—is a particularly tricky question when considering health care. Kenneth J. Arrow’s seminal 1963 paper on this topic (included in this volume) was one of the first to explore the implication of moral hazard for health care, and Amy Finkelstein—recognized as one of the world’s foremost experts on the topic—here examines this issue in the context of contemporary American health care policy. Drawing on research from both the original RAND Health Insurance Experiment and her own research, including a 2008 Health Insurance Experiment in Oregon, Finkelstein presents compelling evidence that health insurance does indeed affect medical spending and encourages policy solutions that acknowledge and account for this. The volume also features commentaries and insights from other renowned economists, including an introduction by Joseph P. Newhouse that provides context for the discussion, a commentary from Jonathan Gruber that considers provider-side moral hazard, and reflections from Joseph E. Stiglitz and Kenneth J. Arrow. “Reads like a fireside chat among a group of distinguished, articulate health economists.” —Choice
Author: Dominique Demougin
Author: Kit-Chun Lam
Author: Espen R. Moen
Author: Jon Strand
Author: R. Cooper
Author: Donald O. Parsons
Author: Dale T. Mortensen
Author: Jeff Borland
Author: Christopher A. Pissarides
Author: Amy Finkelstein