Performance Standards and Incentive Pay in Agency Contracts
Article Abstract:
When the presence of limited liability restricts a principal from imposing monetary fines on an agent in case of poor performance, the principal might use other kinds of punishment threats to deter the agent from shirking. We show that under the optimal contract in this case, the principal sets a performance standard and punishes the agent if the standard is not met, but rewards the agent on a profit-sharing basis if the standard is significantly exceeded. The optimal choice of performance standards for such contracts is discussed. It is shown that punishment threats, although inefficient, often help the principal to discipline the agent. Keywords: Moral hazard; principal-agent models; performance standards; incentive pay JEL classification: D82
Publication Name: Scandinavian Journal of Economics
Subject: Economics
ISSN: 0347-0520
Year: 2000
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Labour Taxation in a Unionised Economy with Home Production
Article Abstract:
The impact of payroll taxes on unemployment and welfare are examined in a model with household production and union-firm wage bargaining. The analysis shows that unemployment typically falls as the payroll tax rate in the market sector for household substitutes (the service sector) is reduced. This holds even when the payroll tax rate in the non-service sector is raised in order to maintain a balanced government budget. Welfare improves with a reduced-service-sector payroll tax rate only if unions are equally strong and firms are equally labour intensive across the sectors. Keywords: Home production; wage formation; unemployment; industry-specific taxation JEL classification: E24; H21; J22; J51
Publication Name: Scandinavian Journal of Economics
Subject: Economics
ISSN: 0347-0520
Year: 2000
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Asymmetric Shocks and Monetary Policy in a Currency Union
Article Abstract:
We analyze the conduct of monetary policy in a currency union in the face of asymmetric shocks. In particular, we compare the stabilization properties of a currency union versus alternative exchange rate arrangements. The relative performance of a currency union is shown to depend on the extent of economic integration in patterns of consumption and production and on the relative weights placed on price stability versus employment stability in the monetary authority's objective function. Keywords: Currency union; stabilization; monetary policy JEL classification: F33; F40
Publication Name: Scandinavian Journal of Economics
Subject: Economics
ISSN: 0347-0520
Year: 2000
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