Valuable jobs and uncertainty

Joseph Ritter and Lowell Taylor

No 1997-005, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Little attention has been given to the link between variation in a firm's circumstances and the resolution of agency problems that pervade the relationship between a firm and its employees. We construct stochastic versions of standard efficiency-wage and performance-bonding models and find that this connection has important and apparently inescapable consequences. Compensation levels depend on characteristics of the firm. The possibility of the firm's exit drive an important counterfactual prediction in both classes of model: compensation rises in dying firms. This result illustrates the need for careful attention to the circumstances under which valuable jobs are liquidated.

Keywords: Job analysis; Employment (Economic theory); Labor turnover (search for similar items in EconPapers)
Date: 1998
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