A Test of Negotiation and Incentive Compensation Models Using Longitudinal French Enterprise Data

John Abowd () and Francis Kramarz ()

No 4044, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we model the determinants of firm level wages and employment explicitly allowing for firm and worker heterogeneity. Our firms have three types of workers (cadres, skilled and unskilled) and may explicitly choose from among three distinct contracting regimes (strong form efficiency, labor demand/right to manage, and incentive contracting). We apply the model to a representative sample of 1,097 French enterprises for the period 1978 to 1987. We find that firms with enterprise level agreements appear to implement incentive contracts. This is significant because in France a firm level agreement is voluntary. On the other hand, firms without accords appear to operate on their labor demand curves. That is, they make labor demand decisions using the sector level agreement as the relevant wage rate. Efficient contracts are dominated by the other two contractual possibilities. External wage rates, which we estimate for each group of workers within each firm, appear not to influence employment decisions in the manner predicted by efficient contracts regardless of the accord status of the firm.

Date: 1992-04
Note: LS
References: View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published as van Ours, J.C., G.A. Pfann and G. Ridder (eds.) Labour Demand and Equilibrium Wage Formation Contributions to Economic Analysis. Amsterdam: NorthHolland, 1993.

Downloads: (external link)
http://www.nber.org/papers/w4044.pdf (application/pdf)

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:nbr:nberwo:4044

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4044

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().