In a principal–multi-agent setting we investigate how optimal contracts should be modified under relative performance evaluation when agents collude. Agents may write side-contracts, which are not contingent on their effort choices but indirectly control them through sidetransfers. We show that the optimal collusion-proof contract is to introduce a ‘‘discriminatory policy’’ in the sense that th...

We describe the evolution of productivity growth in a competitive industry with free entry and exit. The exogenous wage rate determines the firms’ engagement in labor productivity enhancing process innovation. There is a unique steady state of the industry dynamics, which is globally asymptotically stable. In the steady state, the number of active firms, their unit labor cost and supply depend ...

Using longitudinal data on a cohort of high-school graduates, I show that youth who reveal poor attitude and self-esteem subsequently attain fewer years of postsecondary education relative to their high school cohort, are less likely to be employed 14 years following high school and, where working for pay, realize lower earnings. Furthermore, I find evidence that poor attitude and self-esteem i...

Within organizations, there are typically limits to leaders’ authority. This paper explores how organizations are structured in the face of such constraints. Many organizational phenomena can be understood as due to leaders’ desire to bolster the “legitimacy” of their authority. Examples include: above-market-clearing wages, merger decisions, bureaucratic organization, and rejection of overqual...

The Impact of Wage Increases on Job Satisfaction – Empirical Evidence and Theoretical Implications The impact of wage increases on job satisfaction are explored. First, it is empirically established that current job satisfaction rises with absolute wage level as well as with wage increases. Second, a basic job satisfaction function is constructed based on the empirical results, and theoretical ...

What determines reciprocity in employment relations? We conducted a controlled eld experiment and tested the extent to which cash and non-monetary gifts a ect workers' productivity. Our main nding is that the nature of the gift, not its monetary value, determines the prevalence of reciprocal reactions. A gift in-kind results in a signi cant and substantial increase in workers' productivity. An ...

I assess the magnitude of human capital spillovers by estimating production functions using a unique firm-worker matched data set. Productivity of plants in cities that experience large increases in the share of college graduates rises more than the productivity of similar plants in cities that experience small increases in the share of college graduates. These productivity gains are offset by ...

In this paper we derive a model for the joint endogeneity of centrally contracted wages and wage drift in which central union attempts to reduce wage dispersion plays a pivotal role. Empirical results demonstrate that union efforts to level wage differentials exerted large positive effects on both centrally negotiated wage changes and wage drift. We also show that wage drift was accurately pred...

Volunteer work is an increasingly large, yet ill-understood sector of the economy. We show that monetary rewards undermine the intrinsic motivation of volunteers. A unique data set from Switzerland allows us to assess the effects of financial rewards on the effort put into volunteer work. There is a fairly standard pattern regarding the volunteers reaction e.g. to more labor market work hours. ...

This paper argues that the Phillips curve–wage curve controversy cannot be settled within the conventional testing frameworks and suggests an alternative test, which builds on the model of Blanchard and Katz (1997). Using long macro data for the OECD countries, the evidence gives very strong support for the Phillips curve and indicates that wage behaviour is no different among the OECD countrie...