FIXED-WAGES, WAGE DIFFERENTIALS AND WORKER HETEROGENEITIES

Guillaume Carlier and Damien Gaumont

Australian Economic Papers, 2008, vol. 47, issue 4, pages 320-333

Abstract: We study incentive-compatible labour contracts in the case where individual productivity, preference for leisure and time preference rate are unobservable by the principal in a two-period model. We first reduce this three-dimensional problem to a standard one-dimensional screening problem. Features of second-best labour contracts provide a rationale for both fixed-wages and wage differentials. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd/University of Adelaide and Flinders University.

Date: 2008

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Working Paper: FIXED-WAGES, WAGE DIFFERENTIALS AND WORKER HETEROGENEITIES (2005)
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