http://repub.eur.nl/res/concept/jel-J41/ Recent publications classified by JEL Code J41 en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/26879/ 2010-07-01T00:00:00Z Social interaction with colleagues is an important job attribute for many workers. To attract and retain workers, managers therefore need to think about how to create and preserve high-quality co-worker relationships. This paper develops a principal-multi-agent model where agents do not only engage in productive activities, but also in social interaction with their colleagues, which in turn creates co-worker altruism. We study how financial incentives for productive activities can improve or damage the work climate. We show that both team incentives and relative incentives can help to create a good work climate. Dur, A.J. Sol, J. http://repub.eur.nl/res/pub/17666/ 2010-01-05T00:00:00Z Using a formal principal-agent model, I investigate the relation between monetary gift-exchange and incentive pay, while allowing for worker heterogeneity. I assume that some agents care more for their principal when they are convinced that the principal cares for them. Principals can signal their altruism by offering a generous contract, consisting of a base salary and an output-contingent bonus. I find that principals signal their altruism by offering relatively weak incentives and a relatively high expected total compensation, but the latter does not necessarily hold. Furthermore, since some agents do not reciprocate the principal's altruism, the principal may find it optimal to write a contract that simultaneously signals his altruism and screens reciprocal worker types. I show that such a contract is characterised by excessively strong incentives and relatively high expected total compensation. Non, J.A. http://repub.eur.nl/res/pub/14047/ 2008-09-26T00:00:00Z Social interaction with colleagues is an important job attribute for many workers. To attract and retain workers, managers therefore need to think about how to create and preserve high-quality co-worker relationships. This paper develops a principal-multi-agent model where agents do not only engage in productive activities, but also in social interaction with their colleagues, which in turn creates co-worker altruism. We study how financial incentives for productive activities can improve or damage the work climate. We show that both team incentives and relative incentives can help to create a good work climate. We discuss some empirical evidence supporting these predictions. Dur, A.J. Sol, J. http://repub.eur.nl/res/pub/14043/ 2008-09-03T00:00:00Z We develop a model of manager-employee relationships where employees care more for their manager when they are more convinced that their manager cares for them. Managers can signal their altruistic feelings towards their employees in two ways: by offering a generous wage and by giving attention. Contrary to the traditional gift-exchange hypothesis, we show that altruistic managers may offer lower wages and nevertheless build up better social-exchange relationships with their employees than egoistic managers do. In such equilibria, a low wage signals to employees that the manager has something else to offer -- namely, a lot of attention -- which will induce the employee to stay at the firm and work hard. Our predictions are well in line with some recent empirical findings about gift exchange in the field. Dur, A.J. http://repub.eur.nl/res/pub/10910/ 2008-01-18T00:00:00Z This study documents two empirical regularities, using data for Denmark and Portugal. First, workers who are hired last, are the first to leave the firm (Last In, First Out; LIFO). Second, workers’ wages rise with seniority (= a worker’s tenure relative to the tenure of her colleagues). We seek to explain these regularities by developing a dynamic model of the firm with stochastic product demand and hiring cost (= irreversible specific investments). There is wage bargaining between a worker and its firm. Separations (quits or layoffs) obey the LIFO rule and bargaining is efficient (a zero surplus at the moment of separation). The LIFO rule provides a stronger bargaining position for senior workers, leading to a return to seniority in wages. Efficiency in hiring requires the workers’ bargaining power to be in line with their share in the cost of specific investment. Then, the LIFO rule is a way to protect their property right on the specific investment. We consider the effects of Employment Protection Legislation and risk aversion. Buhai, I.S. Portela, M. Teulings, C.N. Vuuren, A.P. van http://repub.eur.nl/res/pub/8343/ 2006-12-15T00:00:00Z We study the relation between formal incentives and social exchange in organizations where employees work for several managers and reciprocate to a manager's attention with higher effort. To this end we develop a common agency model with two-sided moral hazard. We show that when effort is contractible and attention is not, the first-best can be achieved through bonus pay for both managers and employees. When neither effort nor attention are contractible, an 'attention race' arises, as each manager tries to sway the employee's effort his way. While this may result in too much social exchange, the attention race may also be a blessing because it alleviates managers' moral-hazard problem in attention provision. Lastly, we derive the implications of these contract imperfections for optimal organizational design. Roelfsema, H.J. Dur, A.J. http://repub.eur.nl/res/pub/6640/ 2004-06-01T00:00:00Z We examine wage competition in a model where identical workers choose the number of jobs to apply for and identical firms simultaneously post a wage. The Nash equilibrium of this game exhibits the following properties: (i) an equilibrium where workers apply for just one job exhibits unemployment and absence of wage dispersion; (ii) an equilibrium where workers apply for two or for more (but not for all) jobs always exhibits wage dispersion and, typically, unemployment; (iii) the equilibrium wage distribution with a higher vacancy-to-unemployment ratio first-order stochastically dominates the wage distribution with a lower level of labor market tightness; (iv) the average wage is non-monotonic in the number of applications; (v) the equilibrium number of applications is non-monotonic in the vacancy-to-unemployment ratio; (vi) a minimum wage increase can be welfare improving because it compresses the wage distribution and reduces the congestion effects cause! d by the socially excessive number of applications; and (vii) the only way to obtain efficiency is to impose a mandatory wage that eliminates wage dispersion altogether. Gautier, P.A. Moraga-Gonzalez, J.L. http://repub.eur.nl/res/pub/6696/ 2004-01-05T00:00:00Z This paper examines the small world hypothesis. The first part of the paper presents empirical evidence on the evolution of a particular world: the world of journal publishing economists during the period 1970-2000. We find that in the 1970's the world of economics was a collection of islands. Two decades later, in the 1990's the world of economics was much more integrated, with the largest island covering close to half of the population. At the same time, the distance between individuals on the largest island had fallen significantly. Thus we believe that economics is an emerging small world. An exploration of the micro aspects of the network yields three findings: one, the average number of co-authors is very small but increasing; two, the distribution of co-authors is very unequal; and three, there exist a number of `stars', individuals who have a large number of co-authors. Thus the economics world is a set of inter-connected stars. We take the view that individuals decide on whether to work alone or with others; this means that individual incentives should help us understand why the economics world has the structure it does. The second part of the paper develops a simple theoretical model of co-authorship. The main finding of the model is that in the presence of productivity differentials and a shortage of high productivity individuals, inter-connected stars will arise naturally in equilibrium. Goyal, S. Leij, M.J. van der Moraga-Gonzalez, J.L. http://repub.eur.nl/res/pub/6788/ 2003-01-09T00:00:00Z We analyze a model of directed search in which unemployed job seekers observe all wage offers. We allow for the possibility of multiple applications by workers and ex post competition among vacancies. For any number of applications, there is a unique symmetric equilibrium in which vacancies post a common wage. When workers apply to only one vacancy, a single wage is paid and the resulting equilibrium is efficient. When workers make multiple applications, there is dispersion in wages paid, and equilibrium may be inefficient. We show that our results also hold in a steady-state version of the model. Albrecht, J.W. Gautier, P.A. Vroman, S.B. http://repub.eur.nl/res/pub/6846/ 2001-08-27T00:00:00Z We analyze the implications of multiple applications by job seekers for the micro-foundations of the aggregate matching function. We emphasize a coordination failure caused by multiple applications that has not been previously considered, namely, that firms can waste time and effort processing an applicant who is ultimately hired by another firm. Albrecht, J.W. Gautier, P.A. Vroman, S.B. http://repub.eur.nl/res/pub/1952/ 2000-01-01T00:00:00Z This paper develops an applied general equilibrium model to explore various tax cuts aimed at combating unemployment and raising labor supply. The model calibrates modern labor-market theories on wage setting, job matching, labor supply and labor demand on Dutch data. It represents the core of a larger applied general equilibrium model for the Netherlands called MIMIC. Simulations reveal that targeting in-work benefits at the low skilled is the most effective way to cut economy-wide unemployment. However, targeting is likely to damage the quality and quantity of labor supply. Tax cuts in the higher tax brackets boost the quantity and quality of formal labor supply but are less effective in reducing unemployment and in raising unskilled employment and female labor supply. Bovenberg, A.L. Graafland, J.J. Mooij, R.A. de