When designing incentives for a manager, the trade-off between insurance and a "good" allocation of effort across various tasks is often identified with a trade-off between the responsiveness (sensitivity, precision, signal-noise ratio) of the performance measure and its similarity (congruity,...

We examine a situation where efforts on different tasks positively affect production but are not separately verifiable and where the manager (principal) and the worker (agent) have different ideas about how production should be carried out: agents prefer a less efficient way of production. We...

This paper examines the legal and policy implications of information asymmetry on foreign domestic workers employed under the Kafala sponsorship system in the Gulf Cooperation Council (GCC) countries. Drawing from ethnographic and field-based observations in large GCC migrant destinations -...

We provide a new rationale for the use of discretionary bonuses. In a setting with unknown match qualities between a worker and a firm and subjective evaluations by the principal, bonuses are useful in order to make the feedback from the firm to the workers credible. This way workers in good...

The paper explains how workers' expectations of being discriminated against can be self-confirming, accounting for the persistence of unequal outcomes in the labour market even beyond the causes that originally generated them. The theoretical framework used is a two-stage game of incomplete...

We investigate the effects of group identity on hiring decisions with adverse selection problems. We run a laboratory experiment in which employers cannot observe a worker's ability nor verify the veracity of the ability the worker claims to have. We evaluate whether sharing an identity results...

Empirical literature on moral hazard focuses exclusively on the direct impact of asymmetric information on market outcomes, thus ignoring possible repercussions. We present a field experiment in which we consider a phenomenon that we call second-degree moral hazard - the tendency of the supply...

This paper presents several economic models that explore the relationships between imperfect information, racial income disparities, and segregation. The use of race as a signal arises here, as in models of statistical discrimination, from imperfect information about the return to transactions...

Using a panel of 1122 UK firms listed on the London Stock Exchange over the period of 1981 to 2009, endogenous switching regression models (SRM) incorporating a predicted corporate efficiency index are estimated in this paper in an effort to clarify the role of cash flow in examining the impact...