Institutions and Contract Enforcement We provide evidence on how two important types of institutions – dismissal barriers, and bonus pay – affect contract enforcement behavior in a market with incomplete contracts and repeated interactions. Dismissal barriers are shown to have a strong negative impact on worker performance, and market efficiency, by interfering with firms' use of firing threat ...

We examine the association between a firm’s ex ante risk of financial distress and the compensation and incentives provided to newly hired CEOs. Our findings are as follows. First, new CEOs at firms with higher bankruptcy risk receive substantially less compensation than new CEOs at low-risk firms. Second, while pay-performance sensitivity is higher for new CEOs at high-risk firms, the semi-ela...

The current analysis introduces human capital investments which – as all other investment projects – must be carried out given ex-ante uncertain returns. This return uncertainty reflects that particular ex-post ability realizations may or may not induce the possibility to engage in profitable entrepreneurial activity. Managed firms which recruit randomly while offering a certain wage-income can...

The goal of an individual searching for a marriage partner is typically to form a long-term relationship. Marital search is a complicated and costly activity, where opportunities typically arrive over time at uncertain intervals, each party has to evaluate each other’s characteristics, and expectations play an important role. Given these features of marital search, a seminal paper by Mortensen ...

A long-running debate in labour economics concerns the interpretation of industry and occupational wage differentials. One view is that these reflect compensating differentials for mostly unmeasured aspects of jobs: utilities are equalised between industries and occupations, but wages are not. Alternatively, there may be labour market rents: identical workers in some industries and occupations ...

This paper surveys the existing empirical research that uses search theory to empirically analyze labor supply questions in a structural framework, using data on individual labor market transitions and durations, wages, and individual characteristics. The starting points of the literature are the Mincerian earnings function, Heckman’s classic selection model, and dynamic optimization theory. We...

This paper estimates a wage equation with three high-dimensional fixed effects – worker, firm, and job title – using a longitudinal matched employer-employee dataset covering virtually all Portuguese wage earners over a little more than two decades. The variation in log real hourly wages is decomposed into different components related to worker, firm, and job title characteristics (both observe...

Overeducation and Skill Endowments: The Role of School Achievement and Vocational Training Quality Thurow’s job-competition model implies that overeducation is contingent upon the differing skill endowments of employees. As yet, only rudimentary evidence has been furnished to confirm this relationship. In the present paper, we test the theory in a more sophisticated manner, by means of a more d...

We study management turnover in the set of top 5 executives for a sample of 443 large firms from 1993-1998. Using information from news articles and severance disclosures in proxy statements, we find that the rate of forced turnover for non-CEOs is at least as great as the rate for CEOs, but the sensitivity of turnover to aggregate firm performance is relatively smaller for non-CEOs. The probab...

Whatever Works: Dualisation and the Service Economy in Bismarckian Welfare States The paper compares employment structures in five Continental welfare states. These countries feature broad similarities in their reliance on a more dualised model of labour market flexibility, particularly in service occupations with low skill requirements. However, a closer look also reveals considerable differen...