Wage Profile and Monitoring under Adverse Selection

Kyota Eguchi
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Kyota Eguchi: Faculty of Economics, University of Tokyo.

No CIRJE-F-45, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We consider wage profiles and monitoring under adverse selection and moral hazard, that is, extend the Lazear's shirking model to adverse selection. It is shown that workers with higher abilities are offered a steeper wage profile (high total payment) and frequent monitoring. As the self-selection theory shows, workers with high ability get information rent. If the rate of monitoring them were low, the low ability type would pretend to be the high ability type. Hence, to order the low ability type, high monitoring rate is offend to the high ability type.

Pages: 20 pages
Date: 1999-04
New Economics Papers: this item is included in nep-lab and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:99cf45

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