The paper provides a model where authority relaionships are founded on reputation. The viability of authority is the result of subordinates’ free-riding on each other’s challenges, reducing the frequency of challenges, and making reputation worth defending. The party with authority secures subordinates’ compliance through the payment of rents to influence the extent of their failure to act coll...

We analyze the generalized deferred-acceptance algorithm when preferences are known with an error. This algorithm incorporates personalized salaries and is considered as a replacement for the current algorithm for National Resident Matching Program (NRMP). Maintaining Bulow and Levin’s (2006) assumption on preferences, we show that an error in preferences of a worker propagates through the algo...

Sabotage in Tournaments: Evidence from a Laboratory Experiment Although relative performance schemes are pervasive in organizations reliable empirical data on induced sabotage behavior is almost non-existent. We study sabotage in tournaments in a controlled laboratory experiment and are able to confirm one of the key insights from theory: effort and sabotage increase with the wage spread. Addit...

Wage-Hours Contracts, Overtime Working and Premium Pay This paper offers a contract-based theory to explain the determination of standard hours, overtime hours and overtime premium pay. We expand on the wage contract literature that emphasises the role of firm-specific human capital and that explores problems of contract efficiency in the face of information asymmetries between the firm and the...

This paper studies renegotiation in models with on-the-job search, with an application to minimum wages. My formulation nests earlier models in the literature as limit cases when the frequency of renegotiation goes to zero or infinity. The equilibrium wage distribution and the bargaining outcomes are unique. When there is a strong response of turnover to a wage increase, firms accept higher wag...

Over-Education in Multilingual Economies: Evidence from Catalonia Catalonia’s economy is characterized by linguistic diversity and provides a unique opportunity to measure the incidence of language proficiency on over-education, particularly, whether individuals with deficient language skills tend to acquire more formal skills or, on the contrary, become discouraged to attend school. Descriptiv...

The NHS Plan welcomes the use of team rewards but does not specify how team based incentives are to be implemented or make clear what types of teams such incentives are to be given to. This paper looks for insights from economic theory on how to define teams and optimal incentive schemes within them. We give a brief description of the incentive mechanisms suggested in the NHS Plan and discuss t...

Overeducation, Wages and Promotions within the Firm We analyse data from personnel records of a large firm producing energy and telecommunication and test for the effect of deviations between required and attained education of workers. Required education is measured as hiring standards set by the firm. We find the usual effects of overand undereducation in a wage regression, thus rejecting the ...

Job Search with Nonparticipation In a non-stationary job search model we allow unemployed workers to have a permanent option to leave the labor force. Transitions into nonparticipation occur when reservation wages drop below the utility of being nonparticipant. Taking account of these transitions allows the identification of duration dependence in the job offer arrival rate and the wage offer d...

This article considers three different types of experimental labor contracts. We propose a new type of contract (automatic renewal) in which workers are re-hired if they satisfied the effort level required by the firm. A novel aspect of our experimental design is that workers have the chance of investing money in a long-term project in order to increase their profits. We find that renewable dis...