Optimal employment contracts with bankruptcy constraints (Q1062888)
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scientific article; zbMATH DE number 3915959
| Language | Label | Description | Also known as |
|---|---|---|---|
| English | Optimal employment contracts with bankruptcy constraints |
scientific article; zbMATH DE number 3915959 |
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Optimal employment contracts with bankruptcy constraints (English)
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1985
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Consider the optimal incentive compatible contract offered by a firm with private information to its risk-averse employees. If the firm is subject to a binding limited liability or bankruptcy constraint then the contract will yield underemployment in low productivity states (relative to full- information efficiency). Such contracts either yield underemployment in all states, or excessively high variability in employment.
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labour market
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optimal incentive compatible contract
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private information
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bankruptcy constraint
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underemployment
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