Optimal Employment Contracts with Hidden Search

Rasmus Lentz

No 19988, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper I explore optimal employment contract design in a random search framework, where workers search on and off the job for employment opportunities similar to that of Lentz (2010) and Bagger and Lentz (2013). The worker determines the frequency by which employment opportunities arrive through a costly choice of search intensity, which is unobserved by the firm and cannot be directly contracted upon. Firms differ in productivity by which they employ workers. Firms compete over workers in terms of utility promises in a fashion otherwise similar to that of Postel-Vinay and Robin (2002). As in Burdett and Coles (2003) and Burdett and Coles (2010), optimal tenure conditional contracts are shown to be back loaded to discourage the worker from generating outside competitive pressure. The analysis establishes existence, uniqueness and provides characterization of the core mechanism. The paper applies the framework to the analysis of firm provided general human capital training. It is shown that more productive firms provide more training and pay higher wages.

JEL-codes: E24 J01 J24 J31 J33 J41 J6 J63 J64 (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-cta, nep-dge, nep-hrm, nep-lab, nep-lma and nep-mac
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.nber.org/papers/w19988.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:19988

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w19988

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().