Labor-Market Implications of Contracts Under Moral Hazard
نویسنده
چکیده
The optimal contract under moral hazard is embedded in a standard MortensenPissarides matching model. Under standard assumptions, we show that when firms cannot perfectly observe workers’ productivity the optimal contract can take the form of a debt contract exhibiting almost a fixed wage along the business cycle. When this contract is embedded in the standard matching model, the calibrated model generates a more stable wage and more volatile employment than the model with Nash bargaining.
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