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on Contract Theory and Applications |
| By: | Mohamed Belhaj (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France.); Frédéric Deroïan (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France.); Shahir Safi (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France.) |
| Abstract: | We consider agents organized in an undirected network of local complementarities. A principal with a limited budget offers costly bilateral contracts in order to increase the sum of agents' effort. We study excess-effort linear payment schemes, i.e. contracts rewarding effort in excess to the effort made in absence of principal. The analysis provides the following main insights. First, for all contracting costs, the optimal unit returns offered to every targeted agent are positive and generically heterogeneous. This heterogeneity is due to the presence of outsiders, who create asymmetric interaction between contracting agents. Second, when contracting costs are low, it is optimal to contract with everyone and optimal unit returns are identical for all agents. Third, when contracting costs are sufficiently high, it becomes optimal to target a subset of agents, and optimal targeting can lead to NP-hard problems. In particular, when the intensity of complementarities is sufficiently low, a correspondence is established between optimal targeting and the densest k subgraph problem. Overall, the optimal targeting problem involves a trade-off between centrality and budget spending-central agents are influential, but are also more budget-consuming. These considerations can lead the principal to not target central agents. |
| Keywords: | networked synergies, aggregate effort, optimal group targeting, linear contract |
| JEL: | C72 D85 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2015&r=all |
| By: | Normann Rion (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | I build a New-Keynesian dynamic stochastic general-equilibrium model with a dual labor market. Firms and workers meet through a matching technology à-la Diamond-Mortensen-Pissarides and face a trade-off between productivity and flexibility at the hiring stage. All else equal, open-ended contracts are more productive than fixed-term contracts, but they embed a firing cost. The share of fixed-term contracts in job creation fluctuates endogenously, which enables to assess the resort to temporary contracts along the cycle and its response to different shocks. I estimate the model using a first-order perturbation method and classic Bayesian procedures with macroeconomic data from the Euro area. I find that the share of fixed-term contracts in job creation is counter-cyclical. The agents react to shocks essentially through the job creation margin and the contractual composition of the hires. Moreover, a general-equilibrium effect arises ; the substitution between fixed-term and open-ended contracts at the hiring stage influences the job seekers' stock, which in turn impacts job creation. Using my previous estimates and solving the model with a third-order perturbation method, I find that fixed-term employment reacts to negative aggregate demand shocks and uncertainty shocks oppositely. This result suggests that fixed-term employment could be used to identify uncertainty shocks in future research. As for inflation, changes in firing costs do not alter its dynamics as long as open-ended and fixed-term matches do not differ much in productivity all else equal. |
| Keywords: | Fixed-term contracts,Employment protection,New Keynesian model,Inflation dynamics,Uncertainty |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-02570540&r=all |
| By: | Martins, Antje; Riordan, Tyler; Dolnicar, Sara (The University of Queensland) |
| Abstract: | COVID-19 is proving more disruptive to tourism and hospitality than World War II. Workers in these industries are hardest hit because few of them had continuous employment contracts before the pandemic, instead relying on non-standard and contingent arrangements including self-employment, subcontracting, and casual work. Non-standard workers typically lack entitlements such as annual, sick and carers leave. Of all hospitality workers, 65% are non-standard workers. A 25% loading on hourly wages is designed to allow them to build a safety net, but this loading is insufficient to ensure workers’ livelihoods for an extended period of time without work. This research note proposes a new post-COVID-19 model of tourism and hospitality workforce resilience. |
| Date: | 2020–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:4quga&r=all |
| By: | Jorge Gallego; Mounu Prem; Juan F. Vargas |
| Abstract: | The public health crisis caused by the COVID-19 pandemic, coupled with the subsequent economic emergency and social turmoil, has pushed governments to substantially and swiftly increase spending. Because of the pressing nature of the crisis, public procurement rules and procedures have been relaxed in many places in order to expedite transactions. However, this may also create opportunities for corruption. Using contract-level information on public spending from Colombia’s e-procurement platform, and a difference-in-differences identification strategy, we find that municipalities classified by a machine learning algorithm as traditionally more prone to corruption react to the pandemic-led spending surge by using a larger proportion of discretionary non-competitive contracts and increasing their average value. This is especially so in the case of contracts to procure crisis-related goods and services. Our evidence suggests that large negative shocks that require fast and massive spending may increase corruption, thus at least partially offsetting the mitigating effects of this fiscal instrument. |
| Keywords: | Corruption, COVID-19, Public procurement, Machine learning |
| JEL: | H57 H75 D73 I18 |
| Date: | 2020–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:col:000518:018164&r=all |
| By: | Michael Danquah; Kunal Sen |
| Abstract: | In many low-income transition countries, where formal institutions such as courts do not function effectively, informal institutions are often used by firms to minimize transaction risks. We examine the role of informal institutions, in the forms of relational contracting and social networks, in determining the risks that firms are willing to bear in their transactions with their suppliers and customers, and whether firms that bear such risks have higher firm productivity. Our country context is Myanmar, a country which is making a transition from a socialist to market-oriented economy. |
| Keywords: | Firm productivity, informal institutions, relational contracting, Social networks, Transitional economies, Myanmar |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2020-54&r=all |