This paper models employment relationship as a repeated principal-agent problem with private evaluation. The efficient contracts exhibit correlated movements between lagged wage and current effort that are consistent with the positive feedback between pay and morale in practice. Low morale therefore is an integral part of a well-functioning relationship. (JEL: C73, D82, J41, L14 )

This paper uses a measure of skill mismatch to separate wage flexibility from confounding variation in wages driven by differences job quality over the business cycle. I first show that high cyclicality switchers' goes beyond cyclical movements mismatch. Then uncover large across distribution. Among incumbent workers, are acyclical good matches but procyclical poor matches, particular for overq...

This paper reports on a two-tiered experiment designed to separately identify the selection and effort margins of pay for performance (P4P). At recruitment stage, teacher labor markets were randomly assigned “pay-for-percentile” or fixed-wage contract. Once recruits placed, an unexpected, incentive-compatible, school-level re-randomization was performed so that some teachers who applied contrac...

The aim of this paper is twofold. First, to document the use and the diffusion of the “new” compensation and work organisation practices in Danish private sector firms and second, to examine how and why firms differ regarding the adoption of different schemes. The analysis is based on a detailed mail questionnaire answered by 1,600 Danish private sector firms. JEL Codes: J33, J41, L23

We prove existence of equilibria in bipartite social games, where players choose both a strategy in a game and a partner with whom to play the game. Such social games generalize the well-known marriage problem where players choose partners, but there are no endogenous choices subsequent to a matching. Journal of Economic Literature Classification Numbers: A14, C71, C72, C78, J41.

The Todaro Paradox Revisited The Todaro Paradox states that policies aimed at reducing urban unemployment are bound to backfire: they will raise rather than reduce urban unemployment. The aim of this paper is to reexamine this paradox in the context of efficiency wage and search-matching models. For that, we study a policy that consists in decreasing the urban unemployment benefit. In an effici...

We show that in microdata, as well a search and matching model with flexible wages for new hires, wage rigidities of incumbent workers have substantial effects on separations unemployment volatility. Allowing an empirically relevant degree drives volatility the vacancies tightness to data. Thus, rigidity newly hired is not sufficient statistic determining effect macroeconomic outcomes. This fin...

We correct an omission in the definition of the domain of weakly responsive preferences introduced in [B. Klaus, F. Klijn, Stable matchings and preferences of couples, J. Econ. Theory 121 (2005) 75–106] or KK05 for short. The proof of the existence of stable matchings [KK05, Theorem 3.3] and a maximal domain result [KK05, Theorem 3.5] are adjusted accordingly. © 2009 Elsevier Inc. All rights re...

We study selection contests in which the strategic variable is the degree of risk rather than the amount of effort. The selection efficiency of such contests is examined. We show that the selection efficiency of a contest may be improved by limiting the competition in two ways; a) by having a small number of contestants, and b) by restricting contestant quality. JEL Classification: C44, D29, D8...

In this paper, I document that workers in larger cities have significantly more occupational options than smaller ones. They are able to form better matches and earn higher wages. also note differences occupation reallocation patterns across cities. develop a dynamic model of choice microfounds agglomeration economies captures the empirical patterns. The calibration suggests match quality accou...