This paper studies how social relationships between managers and employees affect relational incentive contracts. To this end we develop a simple dynamic principal-agent model where both players may have feelings of altruism or spite toward each other. The contract may contain two types of...

In this paper, we investigate how changes in the skill mix of local labor supply are absorbed by the economy. We distinguish between three adjustment mechanisms: through factor prices, through an expansion in the size of those production units that use the more abundant skill group more...

An important issue in the analysis of cross-sectional dependence which has received renewed interest in the past few years is the need for a better understanding of the extent and nature of such cross dependencies. In this paper we focus on measures of cross-sectional dependence and how such...

We analyze the optimal regional pattern of public employment in an information-constrained second-best redistribution policy showing that regionally differentiated public employment can serve as an expenditure side tagging device, bypassing or relaxing the equity-efficiency trade-off. The...

It is widely argued that declining fertility slows the pace of economic growth in industrialized countries through its negative effect on labor supply. There are, however, theoretical arguments suggesting that the effect of falling fertility on effective labor supply can be offset by associated...

Recent studies indicate that firms often outsource standard and simple tasks, while keeping complex and important inputs inside their boundaries. This observation is difficult to reconcile with the property rights approach of the firm, which suggests that important components should be...

Standard search models are unreliable for structural inference of the underlying sources of wage inequality because they are inconsistent with observed residual wage dispersion. We address this issue by modeling skill development and duration dependence in unemployment benefits in a random on...

We build on Rosenzweig and Wolpin (2000) and Keane (2010) and show that in order to fulfill the Instrumental variable (IV) identifying moment condition, a policy must be designed so that compliers and non-compliers either have the same average error term, or have an error term ratio equal to...

We construct a simple model incorporating various urban labour market phenomena obtaining in developing economies. Our initial formulation assumes an integrated labour market and allows for entrepreneurship, self-employment and wage employment. We then introduce labour market segmentation. In...