Self-Promoting Investments

Carolyn Pitchik and Aloysius Siow

Working Papers from University of Toronto, Department of Economics

Abstract: What is the impact on human capital investment when a worker's ability and investments are observed by the labour market only when the worker invests in self-promoting activities? When firms pay spot market wages, high ability workers overinvest in self- promotion. There is no employment contract that attains full efficiency. Constrained efficiency is attained when employment bonds are feasible. \ The contract that both attains constrained efficiency and minimizes the bond posted offers (i) severance payments, (ii) strategically matching outside offers and (iii) a minimum wage.

JEL-codes: D8 J2 (search for similar items in EconPapers)
Pages: 27 pages
Date: 1997-05-29
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Related works:
Journal Article: Self-Promoting Investments (2008)
Working Paper: Self-Promoting Investments (2008)
Working Paper: Self-Promoting Investments (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:pitchik-97-01

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