Multiperiod Contract Problems with VeriÖable and UnveriÖable Outputs

Kazuya Kamiya and Meg Adachi-Sato
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Meg Adachi-Sato: Royal Melbourne Institute of Technology University

No CIRJE-F-896, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: 　　 Why do some employees receive only …xed or incentive pay, while others receive a mix of …xed and incentive pay? Moreover, why do the lengths of wage contracts di¤er across these types of pay? This paper attempts to respond to this economic puzzle by developing a theoretical model of multiperiod contracts that incorporates short-, medium-, and long-term contracts with di¤erent wage pro…les. We obtain di¤erent combinations of these contracts as equilibria when the e¢ ciency of investment in human capital changes endogenously over time.

Pages: 45 pages
Date: 2013-07
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Citations: View citations in EconPapers (3)

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