|CIRJE-F-896||"Multiperiod Contract Problems with Verifiable and Unverifiable Outputs"|
Kamiya, Kazuya and Meg Adachi-Sato
|Full Paper||PDF file|
|Remarks||Revised version of CIRJE-F-800 (2011).|
Why do some employees receive only xed or incentive pay, while others receive a mix of xed and incentive pay? Moreover, why do the lengths of wage contracts di¤er across these types of pay? This paper attempts to respond to this economic puzzle by developing a theoretical model of multiperiod contracts that incorporates short-, medium-, and long-term contracts with di¤erent wage pro les. We obtain di¤erent combinations of these contracts as equilibria when the e¢ ciency of investment in human capital changes endogenously over time.