Several European countries have reformed their labor market institutions. Incentive effects of unemployment benefits have been an important aspect of these reforms. We analyze this issue in a principal-agent model, focusing on unemployment levels and labor productivity. In our model, a higher...

Recruitment is often delegated to senior employees. Delegated recruitment, however, is vulnerable to moral hazard because senior employees may avoid recruiting the best candidates who could threaten their future seniority. We find that seniors will not deliberately choose bad candidates if the...

Decisions to donate time or money for charitable purposes are typically seen as make-or-buy decisions, implying that there should be a clear distinction between individuals engaging in one of these two forms of giving and that this distinction should be somehow linked to opportunity costs. But...

The paper develops a two-sector general equilibrium search model where 'goods' are produced exclusively in the market and 'services' are produced both in the market and within the households. We use the model to examine how unemployment and welfare are affected by labor taxes in general and...

Basu and Van (1998) show that a ban on child labour may be self-enforcing under the extreme assumption that, above the subsistence level, no amount of consumption can compensate parents for the disutility of child labour. We show that a partial ban may be self-enforcing also in a more general...

We study an important mechanism underlying employee referrals into informal low skilled jobs in developing countries. Employers can exploit social preferences between employee referees and potential workers to improve discipline. The profitability of using referrals increases with referee stakes...

Should principals explain and justify their evaluations? Suppose the principal's evaluation is private information, but she can provide justification by sending a costly cheap-talk message. If she does not provide justification, her message space is restricted, but the message is costless. I...

Subjective performance evaluations are commonly used to provide feedback and incentives to workers. However, such evaluations can generate significant disagreements and conflicts, the severity of which may be driven by many factors. In this paper we show that a workers' level of self-confidence...

We analyze a multitasking model with a verifiable routine task and a skill-dependent activity characterized by moral hazard. Contracts negotiated by firm/employee pairs follow from Nash bargaining. High- and low-skilled employees specialize, intermediate productivity employees perform both...

This paper analyses bargaining over an incentive compatible contract in a moral hazard framework. We introduce the Kalai-Smorodinsky bargaining solution and compare the outcome with the commonly applied Nash solution. Whether worker's effort is higher in the Nash or the Kalai-Smorodinsky...