Publication
Contratos de performance sob risco e na ausência de incentivo
| Summary: | This paper shows that fixed wages are not the optimal solution for a labour contract when the worker’s outside option is a function of a factor that can vary. The worker’s contract will include a bonus that will also be a function of the same factor that modifies its outside option, even though this factor does not depend on his effort and the agent is risk-averse. This result contrasts with the classical theory according to which one should only allocate risk to the employee when such contract is necessary to provide incentives for greater effort from the agent. Another conclusion of this paper is that there is a limit to the risk the employee assumes in the optimal contract, i.e., the value of the bonus is an increasing function of the difference of the values of the worker’s outside options between the possible scenarios only until a certain point, after which the size of the bonus is fixed. |
|---|---|
| Main Authors: | Constantino, Luiz Felipe Monteiro |
| Subject: | Labour contract Bonus Risk aversion Outside option Contrato de remuneração Bônus Aversão ao risco Utilidade reserva Economia Finanças Contrato de trabalho Sistemas de bonificações Risco (Economia) |
| Year: | 2012 |
| Country: | Brazil |
| Document type: | master thesis |
| Access type: | open access |
| Associated institution: | IBICT |
| Language: | Portuguese |
| Origin: | Oasisbr |
| Summary: | This paper shows that fixed wages are not the optimal solution for a labour contract when the worker’s outside option is a function of a factor that can vary. The worker’s contract will include a bonus that will also be a function of the same factor that modifies its outside option, even though this factor does not depend on his effort and the agent is risk-averse. This result contrasts with the classical theory according to which one should only allocate risk to the employee when such contract is necessary to provide incentives for greater effort from the agent. Another conclusion of this paper is that there is a limit to the risk the employee assumes in the optimal contract, i.e., the value of the bonus is an increasing function of the difference of the values of the worker’s outside options between the possible scenarios only until a certain point, after which the size of the bonus is fixed. |
|---|
Funded activities
No funded projects found.