Incentive Contracts and Institutional Labor Market Design

摘要: This paper analyzes a labor market, where firms offer workers incentive contracts and make decisions about irreversible capital investments. The state authority regulates the institutional framework by choosing level of unemployment benefits workers' bargaining power. Our results suggest that reduce incentives to exert effort, thereby decreasing investments firm, thus, output. power, in contrast, has ambiguous effects, as it raises share quasi-rent. On account, increases effort incentives, but reduces investment. We find overall welfare is maximized reducing setting positive power labor.