We analyse the efficiency of the labour market outcome in a competitive searchequilibrium model with endogenous turnover and endogenous general humancapital formation. We show that search frictions do not distort training decisionsif firms and their employees are able to coordinate efficiently,...

It is well known in personnel economics that firms may improve the quality of their workforce by offering performance pay. We analyze an equilibrium model where worker productivity is private information and show that the firms' gain from worker self-selection may not be matched by a...

We analyse the efficiency of the labour market outcome in a competitive search equilibrium model with endogenous turnover and endogenous general human capital formation. We show that search frictions do not distort training decisions if firms and their employees are able to coordinate...

We study equilibrium wage contracts in a labour market with adverse selection and moral hazard. Firms offer incentive contracts to their employees to motivate them to exert effort. Providing incentives comes, however, at a cost, as it leads to misallocation of effort across tasks. With ex ante...

We analyze the optimal (efficiency) wage contract when output is contractible but firms neither observe the workers' effort nor their match-specific productivity. Firms offer wage contracts that optimally trade off effort and wage costs. As a result, employed workers enjoy rents, which in turn...

We study a labour market in which firms can observe workers’ output but not their effort, and in which a worker’s productivity in a given firm depends on a worker-firm specific component, unobservable for the firm. Firms offer wage contracts that optimally trade off effort and wage costs. As...

We analyse the efficiency of the labour market outcome in a competitive search equilibrium model with endogenous turnover and endogenous general human capital formation. We show that search frictions do not distort training decisions if firms and their employees are able to coordinate...

This paper proposes a labour market model with job search frictions where workers have private information on match quality and effort. Firms use wage contracts to motivate workers. In addition, wages are also used to attract employees. We define and characterize competitive search equilibrium...