Incentive Contracts and Total Factor Productivity

Arbeitspapier

This paper proposes a transactions cost theory of total factor productivity. In a world with asymmetric information and transactions costs, effort, and thus productivity, must be induced by incentive schemes. Labor contracts trade off the marginal benefits and the marginal costs of effort. The latter include, in addition to the workers? marginal disutility of effort, also organizational costs and rents. As the economy grows, the optimal contracts change endogenously, inducing higher effort and measured productivity. Transactions costs are also affected by societal characteristics that determine the power of incentive contracts. Therefore, differences in these characteristics may explain cross-economy productivity differences. Numerical experiments demonstrate that the model is consistent both with time series and cross-country observations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Papers ; No. 2004,41

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Economic Growth and Aggregate Productivity: General
• Subject: incentive contracts ; total factor productivity ; economic growth ; Anreizvertrag ; Produktivität ; Transaktionskosten ; Asymmetrische Information ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Demougin, Dominique M. ; Bental, Benjamin
• Event: Veröffentlichung
• (who): Humboldt-Universität zu Berlin, Center for Applied Statistics and Economics (CASE)
• (where): Berlin
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/22214
• Last update: 10.03.2025, 11:44 AM CET