Article ID Journal Published Year Pages File Type
966040 Journal of Macroeconomics 2010 14 Pages PDF
Abstract
We model the design of labor market institutions in an economy characterized by moral hazard and irreversible investment. In this setting, the environment setting affects the bargaining power of labor. At the optimum the allocation of bargaining power balances the aforementioned frictions. We examine the impact of improved monitoring and investigate the implication upon labor share, effort and investment. The model's predictions are consistent with recent decreasing labor shares and wages per effective labor units observed in most OECD countries. It is also consistent with rising labor productivity and declining ratio between effective labor and capital found in many of these countries.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
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