This paper proposes a transactions cost theory of total factor productivity. In a world with asymmetric information and transactions costs, effort, and thus productivity, must be induced by incentive schemes. Labor contracts trade off the marginal benefits and the marginal costs of effort. The...

In this study, we examine two adjudication methods designed to resolve disputes between principals and agents concerning bonus payments in relationships characterized by moral hazard and where the parties have been forced to use soft, imprecise, and subjective information to align incentives....

In many countries, wages are set by collective agreements, which tend to impose standard wages across workers in the same sector and job. We analyze the impact of imposing such standard wages on labor market outcomes. We set the labor relationship in a moral-hazard environment where two...

We analyze an environment plagued by double moral hazard where the worker's effort level and the employer's monitoring level are not contractible. In such an environment, the employer tends to over-monitor thereby inducing low effort. To ease the latter problem, the employer may choose to...