Moen, Espen R.; Rosén, Åsa - In: Journal of the European Economic Association 4 (2006) 6, pp. 1165-1192
We analyze the optimal (efficiency) wage contract when output is contractible but firms neither observe the workers' effort nor their match-specific productivity. Firms offer wage contracts that optimally trade off effort and wage costs. As a result, employed workers enjoy rents, which in turn...