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- Title
A Moral Hazard Approach to Wage Discounts under Informal Hiring.
- Authors
Duran, Miguel A.; Morales, Antonio J.
- Abstract
This study discusses informal hiring in terms of a standard principal-agent model. We have developed an adverse selection model of the labour market where effort is not contractible and employers have the opportunity to use informal search channels for hiring purposes. This standard framework enables us to provide an effort-based explanation of the wage gap associated with informal hiring. Besides the wage discount, another feature of the equilibrium is that low-ability workers informally hired shirk.
- Subjects
EMPLOYEE recruitment; WAGE differentials; MATHEMATICAL models; LABOR market; JOB hunting -- Social aspects; EMPLOYEE selection
- Publication
Scottish Journal of Political Economy, 2014, Vol 61, Issue 2, p119
- ISSN
0036-9292
- Publication type
Article
- DOI
10.1111/sjpe.12037