Optimal incentive mechanisms may require that agents be rewarded differentially even when they are completely identical and induced to act the same. We demonstrate this point using a simple incentive model where agents’ decisions about effort exertion are mapped into a probability that the project will succeed. We show that full discrimination across all agents is required if and only if the te...

In a matching and intra…rm bargaining economy with constant return to scale production and matching technologies, large …rms hire and train workers e¢ciently. The e¢ciency of the competitive economy relies on the ability of large …rm to take into account the consequences of training on the wages bargained inside the …rm. This intra…rm bargaining process solves the hold-up problem that is associ...

Overlapping labour markets arise when some types of workers do not meet employers with some types of jobs. For example, skilled workers could seek high-skill or low-skill jobs, but low skill workers could be limited to low-skill jobs. The paper derives conditions for equilibrium and efficiency, distinguishes reducible from irreducible overlapping labour markets, and describes distributional imp...

We utilise a rich set of regional labour market variables to explain regional variation in Norwegian manufacturing wages. In particular, regional indicators of labour market conditions are computed from survey data in which respondents are asked to evaluate local employment opportunities. We find that average reported satisfaction with local job prospects and other survey-based indicators perfo...

This paper analyzes optimal wage contracting assuming agents are not subjective expected utility maximizers but are, instead, ambiguity (or uncertainty) averse decision makers who maximize Choquet expected utility. We show that such agents will choose not to include any indexation coverage in their wage contracts even when inflation is uncertain, unless the perceived inflation uncertainty is hi...

This paper empirically assesses the incidence and efficiency of Round I of the federal urban Empowerment Zone (EZ ) program using confidential microdata from the Decennial Census and the Longitudinal Business Database. Using rejected and future applicants to the EZ program as controls, we find that EZ designation substantially increased employment in zone neighborhoods and generated wage increa...

The Family Gap in Wages: What Wombmates Reveal We shed new light on the effects of having children on hourly wages by exploiting access to data on the entire population of employed same-sex twins in Denmark. Our second contribution is the use of administrative data on absenteeism; the amount of hours off due to holidays and sickness. Our results suggest that childbearing reduces female hourly w...

Usual estimates of the female-male wage gap may be biased because female selection could be different in different parts of the labor market. This paper proposes an estimator for the wage gap in models with unobserved heterogeneity in the selection rule. It applies to the subpopulation of “always employed” women, which is similar to men in labor force attachment. Using CPS data from 1976 to 200...

The Public Perception and Normative Valuation of Executive Compensation: An International Comparison This paper describes individuals’ perceptions and normative valuations of executive compensation using comparable survey data for fifteen OECD member countries. An overwhelming majority of individuals (more than 90%) believes that top executives earn more than they actually deserve. However, the...

This paper looks at male wage inequality in the United Kingdom across industries and regions over a fifteen year period. After controlling for the heterogeneity of productivity characteristics across the population, that part of wage inequality which cannot be explained by observable worker characteristics is examined. This is undertaken at both the industry and regional level to assess the key...