Workers' Trust Funds and the Logic of Wage Profiles / George A. Akerlof, Lawrence F. Katz.

By:

Akerlof, George A

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w2548.Publication details: Cambridge, Mass. National Bureau of Economic Research 1988.Description: 1 online resource: illustrations (black and white)Subject(s):

J - Labor and Demographic Economics

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Abstract: This paper defines a concept, a worker's trust fund, which is useful in analyzing optimal age-earnings profiles. The trust fund represents what a worker loses if dismissed from a job for shirking. In considering whether to work or shirk, a worker weighs the potential loss due to forfeiture of the trust fund if caught shirking against the benefits from reduced effort. This concept is used to show that the implicit bonding in upward sloping age-earnings profiles is not a perfect substitute for an explicit upfront performance bond (or employment fee). It is also shown that the second-best optimal earnings profile in the absence of an upfront employment fee pays total compensation in excess of market clearing in a variety of stylized cases.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w2548 (Browse shelf(Opens below))	Not For Loan

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March 1988.

This paper defines a concept, a worker's trust fund, which is useful in analyzing optimal age-earnings profiles. The trust fund represents what a worker loses if dismissed from a job for shirking. In considering whether to work or shirk, a worker weighs the potential loss due to forfeiture of the trust fund if caught shirking against the benefits from reduced effort. This concept is used to show that the implicit bonding in upward sloping age-earnings profiles is not a perfect substitute for an explicit upfront performance bond (or employment fee). It is also shown that the second-best optimal earnings profile in the absence of an upfront employment fee pays total compensation in excess of market clearing in a variety of stylized cases.