NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Armin Falk

Contact and additional information for this authorAll papers and publicationsWorking Papers onlyWorking Papers with publication info

Working Papers and Chapters

April 2008Institutions and Contract Enforcement
with David Huffman, W. Bentley MacLeod: w13961
We provide evidence on how two important types of institutions -- dismissal barriers, and bonus pay -- affect contract enforcement behavior in a market with incomplete contracts and repeated interactions. Dismissal barriers are shown to have a strong negative impact on worker performance, and market efficiency, by interfering with firms' use of firing threat as an incentive device. Dismissal barriers also distort the dynamics of worker effort levels over time, cause firms to rely more on the spot market for labor, and create a distribution of relationship lengths in the market that is more extreme, with more very short and more very long relationships. The introduction of a bonus pay option dramatically changes the market outcome. Firms are observed to substitute bonus pay for threat of fi...

Contact and additional information for this authorAll papers and publicationsWorking Papers onlyWorking Papers with publication info

 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us