Optimal Wage Contracts under Reference-Dependent Preferences

• 발행기관: 한국계량경제학회
• 저자명: Gue Sung Choi Jaeok Park
• 간행물 정보: 『JOURNAL OF ECONOMIC THEORY AND ECONOMETRICS』Vol.32 No.1, 54~79쪽, 전체 26쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2021.03.30

영문 초록

In this paper, we consider a labor market consisting of a firm and a worker and study employment contracts that the firm chooses when the worker has reference-dependent preferences with respect to wages. The firm offers an employment contract, which specifies the effort level and the wage in each period, and if the worker accepts the contract, she decides whether to continue working for the firm in each period. The worker forms a reference wage in each period based on the past wages, and we introduce gain-loss utility into the worker’s payoffs from employment and unemployment. We show, among other results, that when the initial reference wage is low, the firm’s optimal employment contract has initial high wages if the worker is loss averse and initial low wages if she is gain seeking. Our results provide explanations for signing bonuses and seniority-based pay systems based on reference-dependent preferences.

목차

1. INTRODUCTION

2. THE MODEL

3. OPTIMAL CONTRACTS

4. CONCLUSION

키워드

Reference Dependence Wage Contracts Gain-Loss Utility Loss Aversion Gain Seeking