We develop models of optimal linear and non-linear income taxation with endogenous human capital formation to explore optimal education subsidies. Optimal subsidies on education ensure efficiency in human capital accumulation and thus play an important role in alleviating the tax distortions on...

This paper presents an alternative implementation of firm-level collective wage bargaining, where bargaining proceeds as a finite sequence of sessions between a firm and a union of variable size. We investigate the impact of such a `gradual' union on the wage-employment contract in an economy...

We present an experimental test of a shirking model where monitoring intensity is endogenous and effort a continuous variable. Wage level, monitoring intensity and consequently the desired enforceable effort level are jointly determined by the maximization problem of the firm. As a result,...

We study the relation between formal incentives and social exchange in organizations where employees work for several managers and reciprocate to a manager's attention with higher effort. To this end we develop a common agency model with two-sided moral hazard. We show that when effort is...

This study documents two empirical regularities, using data for Denmark and Portugal. First, workers who are hired last, are the first to leave the firm (Last In, First Out; LIFO). Second, workers’ wages rise with seniority (= a worker’s tenure relative to the tenure of her colleagues). We...

Standard economic theory predicts that firms will not invest in general training and will underinvest in specific training. Empirical evidence, however, indicates that firms do invest in general training of their workers. Evidence from laboratory experiments points to less underinvestment in...