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Inspired by a recent observation about an online retail company, this paper explains why a firm may find it optimal to offer an exit bonus to recent hires so as to induce self-selection. We study a double adverse selection problem, in which the principal can neither observe agents’ commitment...
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response of unemployment in our incentive pay model calibrated to strongly procyclical wages. …We introduce dynamic incentive contracts into a model of inflation and unemployment dynamics. Our main result is that … wage cyclicality from incentives neither affects the slope of the Phillips curve for prices nor dampens unemployment …
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risk of unemployment two years after the treatment. However, the effects are heterogeneous as to gender, age, education …
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