We offer a unified framework to analyse the determination of employment, employee effort, wages, profit-sharing and capital structure when firms face stochastic revenue shocks. We apply a generalized Nash bargaining solution which extends the wage bargaining literature by incorporating effciency...

I discuss some key issues raised by behavioral economics for better understanding the working of the labor market. Amongst the key points in this paper are: (i) a revised modeling of the labor supply curve, with a specific focus on the target income approach (ii) elaborating on the importance of...

In an efficiency wage economy, lump-sum severance pay from which shirkers can be excluded raises employment. However, severance payments are usually related to wages. It is shown that earnings-related, mandated severance pay will have ambiguous employment effects if effort can be varied...

To prevent trained workers from quitting to open their own businesses, firms pay higher than market efficiency wages to reduce turnover. What is the impact of macroeconomic shocks and policy innovations, such as labor market reform, in an economy where this is of central importance? - Combining...