A Tale of Two Wages: Separating Contract from Governance
نویسنده
چکیده
This paper distinguishes between governance structure and contractual form. The basic premise is that researchers often confuse these two concepts when they develop or empirically test models within the transaction cost framework. In the paper I utilize a simple principal-agent model to show that transaction cost factors affect both contractual form and governance structure, but not identically. Transaction cost factors that are known to result in employment as a governance structure do not automatically result in contracts characterized by the payment of fixed-wages, as suggested by economic theory. Instead, incentive pay and the delegation of decision-making authority to workers may be preferred by firm owners. The implication is that the relationship between a firm and a worker involves a two stage decision-making process by the firm owner. The first is the choice of governance structure, the second is the nature of the contract linking the worker to the firm. (JEL D23)
منابع مشابه
Credit Rationing , Wealth Inequality , and Allocation of Talent 1
We study an economy where agents are heterogeneous in terms of observable wealth and unobservable talent. Adverse selection forces creditors to ask for collateral. We study the two-way interaction between rationing in the credit market and the wages offered in the labor market. Both pooling and separating credit contracts can be offered in equilibrium. The minimum wealth needed to obtain a sepa...
متن کاملCredit Rationing , Wealth Inequality , and Allocation of Talent
We study an economy where agents are heterogeneous in terms of observable wealth and unobservable talent. Adverse selection forces creditors to ask for collateral. We study the two-way interaction between rationing in the credit market and the wages offered in the labor market. Both pooling and separating credit contracts can be offered in equilibrium. The minimum wealth needed to obtain a sepa...
متن کاملThe Role of Corporate Governance Mechanisms and the Auditor's Specialty in Debt Contract Strictness
Objective: Violation of contractual conditions leads to the transmission of bad news due to poor performance and the expertise of auditors and regulatory mechanisms can be a factor in adjusting it. In this article, the purpose is to examine the role of strictness in the debt contract and the auditor's expertise. Research Method: In order to study the subject based on the logistic regression mo...
متن کاملRe-telling the Tale of the Commons: A Tale of Rent Seeking, Corruption, Stockpiling and (Even) Tragedy
The tale of the tragedy of the commons is re-told as a problem of vertical governance rather than a problem of horizontal contracting. States make the fundamental determination concerning the amount of management conferred upon resources within their territories, and the groups using these resources are substantially constrained by this prior determination. In particular, it is demonstrated tha...
متن کاملAn Architectural Tale of the Two Cities
A comparative study of the corresponding styles of Western and Iranian modern architecture has hardly ever been carried out in detail. This paper aims to sketch out an outline for such an investigation and to present a summary of empirical evidence accompanied by field observations to elaborate the ongoing trend of relationship between architectural styles in Iran and that of the West. This is ...
متن کامل