tThis paper studies wage and employment rigidity in a labor relationship in different organizationalcontexts. In investor owned firms, if the contract allows for flexible wages, the employer may havean incentive to opportunistically claim low demand and cut wages. Anticipating the employer’s oppor-tunism, workers may demand a fixed-wage contract, which may lead to inefficient layoffs in the presenceof negative demand shocks. In contrast, in cooperatives, where the employer does respond to workers,the risk of employer’s opportunism diminishes and results in an equilibrium characterized by more flex-ible wages and fewer layoffs. By developing these arguments we challenge the traditional explanation ofworkers’ preference for fixed wages based on risk aversion. To support our claim, we develop a principalagent model in which there is incomplete information on both sides of the employment relation. Wemodel both the case of investor-owned firms and worker cooperatives.

Employer moral hazard and wage rigidity. The case of worker ownedand investor owned firms / Tortia, Ermanno Celeste; Albanese, Marina; Navarra, Cecilia. - In: INTERNATIONAL REVIEW OF LAW AND ECONOMICS. - ISSN 0144-8188. - STAMPA. - 43:(2015), pp. 227-237. [10.1016/j.irle.2014.08.006]

Employer moral hazard and wage rigidity. The case of worker ownedand investor owned firms

Tortia, Ermanno Celeste;Albanese, Marina;Navarra, Cecilia
2015-01-01

Abstract

tThis paper studies wage and employment rigidity in a labor relationship in different organizationalcontexts. In investor owned firms, if the contract allows for flexible wages, the employer may havean incentive to opportunistically claim low demand and cut wages. Anticipating the employer’s oppor-tunism, workers may demand a fixed-wage contract, which may lead to inefficient layoffs in the presenceof negative demand shocks. In contrast, in cooperatives, where the employer does respond to workers,the risk of employer’s opportunism diminishes and results in an equilibrium characterized by more flex-ible wages and fewer layoffs. By developing these arguments we challenge the traditional explanation ofworkers’ preference for fixed wages based on risk aversion. To support our claim, we develop a principalagent model in which there is incomplete information on both sides of the employment relation. Wemodel both the case of investor-owned firms and worker cooperatives.
2015
Tortia, Ermanno Celeste; Albanese, Marina; Navarra, Cecilia
Employer moral hazard and wage rigidity. The case of worker ownedand investor owned firms / Tortia, Ermanno Celeste; Albanese, Marina; Navarra, Cecilia. - In: INTERNATIONAL REVIEW OF LAW AND ECONOMICS. - ISSN 0144-8188. - STAMPA. - 43:(2015), pp. 227-237. [10.1016/j.irle.2014.08.006]
File in questo prodotto:
File Dimensione Formato  
Albanese-Navarra-Tortia_IRLE_2014_EMH.pdf

Solo gestori archivio

Tipologia: Versione editoriale (Publisher’s layout)
Licenza: Tutti i diritti riservati (All rights reserved)
Dimensione 493.33 kB
Formato Adobe PDF
493.33 kB Adobe PDF   Visualizza/Apri
Albanese Navarra Tortia 2015_EMH (1).pdf

Solo gestori archivio

Descrizione: Articolo principale
Tipologia: Versione editoriale (Publisher’s layout)
Licenza: Tutti i diritti riservati (All rights reserved)
Dimensione 640.1 kB
Formato Unknown
640.1 kB Unknown   Visualizza/Apri
Employer moral hazard.pdf

accesso aperto

Descrizione: Working papers
Tipologia: Pre-print non referato (Non-refereed preprint)
Licenza: Tutti i diritti riservati (All rights reserved)
Dimensione 648.63 kB
Formato Adobe PDF
648.63 kB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11572/97474
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 10
  • ???jsp.display-item.citation.isi??? 10
social impact