Hold-up and the inefficiency of job assignments

Fumi Kiyotaki

Research in Economics, 2010, vol. 64, issue 1, 36-44

Abstract: This paper examines the trade-off between job assignments and incentives for specific investments. Under an incomplete contract, employees tend to underinvest in firm-specific human capital. To defuse this hold-up problem, the employer chooses an inefficiently low promotion standard. This result provides an explanation of the Peter Principle. However, if human capital investments also have an impact on promotion, the optimal standard might be inefficiently high.

Keywords: Peter; principle; Hold-up; problem; Human; capital; investment (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1090-9443(09)00047-7
Full text for ScienceDirect subscribers only

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:eee:reecon:v:64:y:2010:i:1:p:36-44

Access Statistics for this article

Research in Economics is currently edited by Federico Etro

More articles in Research in Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().