تطبیق شغل زمانی که قراردادهای استخدام از مخاطرات اخلاقی رنج می برند
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|3812||2011||16 صفحه PDF||سفارش دهید||11450 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : European Economic Review, Volume 55, Issue 7, October 2011, Pages 964–979
We consider a job matching model where the relationships between firms and wealth-constrained workers suffer from moral hazard. Specifically, effort on the job is non-contractible so that parties that are matched negotiate a bonus contract. Higher unemployment benefits affect the workers' outside option. The latter is improved for low-skilled workers. Hence they receive a larger share of the surplus, which strengthens their effort incentives and increases productivity. Effects are reversed for high-skilled workers. Moreover, raising benefit payments affects the proportion of successful matches, which induces some firms to exit the economy and causes unemployment to increase.
Nowadays a substantial proportion of jobs include a performance pay component, and this share has been increasing over the last decades. For example, Lemieux et al. (2009) find for the U.S. labor market that the fraction of workers on performance pay jobs ranges from 30% for craftsmen to 78% for sales workers. The overall incidence of jobs that include a performance pay component has increased from about 38% in the late 1970s to around 45% in the 1990s.1 Often, advances in information and communication technologies that have reduced the costs of monitoring workers are cited as an explanation for this development. This paper integrates performance pay into a job matching model and analyzes the effect of unemployment benefit payments on worker productivity and unemployment levels. Specifically, we consider a stochastic job matching environment with a continuum of workers who differ in their skill level so that they are of heterogeneous productivity (see, e.g. Pissarides, 2000). This productivity is revealed to a firm at the moment it is matched with an unemployed worker, e.g. through assessment centers, job interviews or credentials. Hence labor contracts will depend on productivity, while a worker's effort during an employment relation is non-contractible, leading to moral hazard. In addition, their wages must include a positive fixed component due to the existence of minimum wages or due to wealth constraints that lead to limited liability. Each firm-worker match bargains over the design of a bonus contract.2 At the negotiation stage a firm's disagreement point is given by its exit option; hence assuming perfect competition it is zero. In contrast, a worker's threat point depends on his type, on unemployment benefits and on the unemployment level. In particular, at the contracting stage a higher level of unemployment benefits directly improves the workers' disagreement point. Hence, for successful matches the respective worker's share of the total surplus from an employment relationship rises.3 Keeping in mind that moral hazard usually leads to inefficiently low effort levels, raising the worker's share of surplus induces the negotiating parties to increase the incentive component of the wage contract; hence raising effort efficiency and, thereby, the overall surplus. There are, however, two countervailing effects associated with higher unemployment benefits. First, a firm-worker match which was initially indifferent between agreeing to a contract or breaking up negotiation now prefers the improved outside option. Second, by lowering profits of firms the economy's labor market equilibrium is affected. In particular, some firms are induced to exit the economy. Both effects work to increase unemployment. This creates a negative indirect effect on the outside option of workers because it takes longer to find a new job. Whether the positive direct effect of raising unemployment benefits or the negative indirect effect dominates depends on the productivity of a worker. In particular, the forgone wage during spells of unemployment is larger for high productivity workers so that their outside option is more affected by the indirect effect. Accordingly, if the effort enhancing direct effect of unemployment benefits dominates, then moral hazard on the job may provide an argument for raising their level. The effects of minimum wages differ substantially from those of unemployment benefits. Minimum wages do not affect a worker's outside option if negotiations fail and, therefore, leave bargaining power unchanged. However, they impose a lower limit for the fixed component of the wage. Hence, at the contracting level minimum wages tend to reduce bonuses, lowering the power of incentive contracts and, thus, decreasing the level of effort negotiated. This reduces the firms' expected profit and induces some of them to exit, thus also raising unemployment. Accordingly, we conclude that minimum wages are never welfare enhancing in the context of our model. Obviously, bonus contracts are just one out of several instruments that are used to incentivice workers. Other examples include piece rates, promotions, subjective performance evaluations and deferred compensation (see Prendergast, 1999). Reflecting this variety in a single analytical model is not feasible. We have chosen to focus on bonus contracts because they capture the main idea which drives our results: that higher wages are often associated with higher effort incentives. Furthermore, bonus contracts appear as a suitable modelling device because they are used for different segments of the labor force, ranging from waitresses at the Oktoberfest in Munich to CEOs.4 Our paper contributes to the rich literature on the incentive effects of unemployment benefits (see Holmlund, 1998 and Fredriksson and Holmlund, 2006 for surveys). A part of this literature also finds that benefit payments may raise productivity and unemployment levels. However, the mechanism by which this result occurs is a different one, and many of our modelling choices are driven by the intention to isolate those effects that are original to our paper. For example, while there is a substantial literature that focuses on moral hazard in the search effort of unemployed agents, we analyze effects of moral hazard during an employment relationship. In this respect, the two approaches complement each other. Acemoglu and Shimer, 1999 and Acemoglu and Shimer, 2000 consider a search model with risk-averse workers. Unemployment insurance encourages workers to take the risk of applying for high wage jobs, and firms respond by creating more capital-intensive, high productivity jobs. Thereby, output is raised, but also the risk of becoming unemployed. Moreover, due to moral hazard workers may respond to higher benefit payments by reducing their search effort. These effects are absent in our paper because workers are risk-neutral, bear no search costs and their productivity does not depend on the firms with which they are matched; hence there is no reason to search for a better match.5Mortensen (1977) emphasizes the entitlement effect which arises since unemployed people are often not eligible for benefit payments (see also Fredriksson and Holmlund, 2001). Therefore, high unemployment benefits provide an additional incentive to seek employment so as to become entitled to them in the case of a future job loss. Our paper is also related to the literature on efficiency wages since both focus on endogenous work effort. In the standard efficiency wage model, workers that are convicted shirking loose their job. Higher unemployment benefits reduce the associated costs and, therefore, effort incentives (Shapiro and Stiglitz, 1984).6 In our model, jobs are terminated at an exogenous rate that is independent of effort, but badly performing workers risk not receiving a bonus. Moreover, unemployment benefits may improve a worker's outside option, thereby leading to a higher bonus and higher effort incentives. Finally, we should mention the substantial literature on minimum wages. A contribution that shares some important elements with our model – such as Nash bargaining of wages and job matching with heterogeneous workers – is Flinn (2006). In this paper, higher minimum wages may enhance welfare because they enable workers to negotiate a higher share of the job surplus. This leads to increased search activity which is beneficial because productivity is match-specific. In our paper, this effect is missing because we do not consider on-the-job search. Moreover, minimum wages do not only affect the size but also the composition of the wage, reducing its incentive component. The remainder of the text is structured as follows. After introducing the basic model (Section 2) and determining the parties' expected discounted payoffs (Section 3), we analyze contract negotiations for an individual firm/worker match (Section 4). In Sections 5 and 6 we broaden the perspective and determine the general labor market equilibrium. Sections 7 and 8 examine the effect of unemployment benefits and minimum wages on effort incentives and unemployment levels. Section 9 discusses a regulator's choice of the optimal level of unemployment benefits. Finally, in the concluding Section 10 we discuss some empirical evidence that is related to our results. An appendix contains all proofs.
نتیجه گیری انگلیسی
In this paper we have argued that the integration of performance pay into a job matching model may provide a rationale for unemployment benefits. In particular, unemployment benefits improve the bargaining position of workers whose skills are below a threshold level. This enables them to negotiate higher expected wages which often involve a higher incentive component of the wage, thereby strengthening the workers' effort efficiency. However, effects are reversed for high-skilled workers. Moreover, higher unemployment benefits reduce the number of firm/worker matches for which mutually beneficial contracts exist and increase the length of unemployment spells, thereby increasing unemployment. The optimal benefit level balances these effects. Performance pay is nowadays an increasingly important component of many wage contracts, but there is little systematic research about its interplay with unemployment benefits and minimum wages. The model has been set-up so as to examine this specific interplay, while neglecting other important mechanisms that are commonly used to explain trends in unemployment, productivity and wages (see, e.g. OECD, 2007). The relative importance of our mechanism as compared to other explanations is ultimately an empirical issue which is beyond the scope of this paper. Nevertheless, our main results should at least be consistent with the empirical evidence, which we now briefly discuss. There is substantial evidence that a rise in unemployment benefits tends to increase unemployment (e.g. Blanchard and Wolfers, 2000 and Lalive et al., 2006). Furthermore, Blanchard (2004) shows that in many European countries high benefit payments have led not only to high unemployment levels, but also to a relatively high productivity per hours worked. Using a quantitative model that is calibrated to capture the U.S. labor market for high school graduates, Acemoglu and Shimer (2000) also find a positive effect of unemployment benefits on productivity. These studies do not differentiate between low- and high-skilled workers, for which we predict partly opposing effects. However, for the main implication of this result, that wage inequality should be smaller in countries that have high unemployment benefits, supporting evidence exists. For example, Acemoglu (2003) shows that wage inequality is higher and increased more sharply during the 1980s in the U.S. as compared to continental Europe, where the level of unemployment has remained comparatively high. Moreover, he argues that wage inequality in Denmark and Sweden, i.e. in countries that are known for having high unemployment benefits, is substantially lower than predicted by the traditional explanations. While these findings are consistent with the results from our model, there is less direct evidence regarding the specific mechanism which we have discussed in this paper. Nunziata (2005) and van der Horst (2003) find that an increase in the replacement rate allows workers to negotiate higher wages, but leads to more unemployment. Furthermore, there is an empirical literature which verifies the link between higher bonuses and effort (e.g. Prendergast, 1999 and Chiappori and Salani, 2003). There are several possible extensions of the paper. Obviously, distortionary taxation would reduce the optimal level of unemployment benefits. Minimum wages – at least those in the private sector – need not be financed by taxes and, therefore, are less prone to this problem. However, we have shown that they cannot be used as a substitute since they lack the positive effect that unemployment benefits have on effort. Given that we have a repeated moral hazard problem, another interesting extension would be to allow for contracts with memory.25 For instance, by delaying bonus payments the principal may be able to reduce the fixed payment F in future periods below M and still satisfy the limited liability constraint. Over time, this would weaken the trade-off between efficiency and rent, which in our analysis induces the principal to use an inefficiently low bonus. Overall, one would expect that this reduces the agency problem and, therefore, weakens the positive effects of social benefit payments on effort efficiency. Moreover, we have only considered a uniform level of unemployment benefits. If benefits were higher for more skilled workers, this would strengthen their effort enhancing direct effect especially for those workers for which the indirect effect is particularly detrimental. In addition, an increase in the effort of high-skilled workers is particularly rewarding. This would provide a justification for the widely observed dependence of benefit payments on previous earnings. Another extension would be to consider the generalized Nash bargaining solution and, more interestingly, to make the bargaining power coefficient a policy variable that can be set by the social planner. Such an analysis would be particularly interesting if there would be a countervailing effect that balances the current model bias of strengthening the workers' bargaining power. An immediate idea would be to explicitly introduce capital into the model and discuss the implication of unemployment benefits on investment decisions and growth.