High Compensation Creates a Ratchet Effect
METADATA ONLY
Loading...
Author / Producer
Date
2009-07-01
Publication Type
Journal Article
ETH Bibliography
yes
Citations
Altmetric
METADATA ONLY
Data
Rights / License
Abstract
Consider a firm which pays a (credit‐constrained) worker for his effort over two periods. The more the firm pays in one period, the wealthier is the worker in the following period, and so the more he must then be paid for a given effort. We describe the profit‐maximising contract under these conditions, showing how this wealth‐ratchet effect can raise wages over time, and cause the firm to fire older workers.
Permanent link
Publication status
published
Editor
Book title
Journal / series
Volume
119 (539)
Pages / Article No.
1208 - 1224
Publisher
Blackwell
Event
Edition / version
Methods
Software
Geographic location
Date collected
Date created
Subject
Organisational unit
03729 - Gersbach, Hans / Gersbach, Hans