FIXED‐WAGES, WAGE DIFFERENTIALS AND WORKER HETEROGENEITIES

Guillaume Carlier and Damien Gaumont

Australian Economic Papers, 2008, vol. 47, issue 4, 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.

Date: 2008
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https://doi.org/10.1111/j.1467-8454.2008.00352.x

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Working Paper: Fixed-wages, wage differentials and worker heterogeneities (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecp:v:47:y:2008:i:4:p:320-333

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