Just-cause provisions, severance pay, and the efficiency wage hypothesis
A simple model of employment contracting is employed to examine the effectiveness of just-cause provisions in alleviating employer opportunism in two types of efficiency wage contracts-standard contracts, in which wages exceed the worker's marginal contribution, and deferred wages, which are paid after a period of tenure in the firm. It is argued that just-cause employment policies are necessary and sufficient to prevent employer opportunism when standard efficiency wages are utilized. However, just-cause policies are not sufficient to deter employer opportunism when employment contracts are of the delayed-payment type. In these contracts, other contractual provisions, such as severance provisions, are also necessary. Copyright © 2000 John Wiley & Sons, Ltd.
Year of publication: |
2000
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Authors: | James, Harvey S. ; Johnson, Derek M. |
Published in: |
Managerial and Decision Economics. - John Wiley & Sons, Ltd., ISSN 0143-6570. - Vol. 21.2000, 2, p. 83-88
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Publisher: |
John Wiley & Sons, Ltd. |
Saved in:
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