Arbeitspapier

Regulating damage clauses in (labor) contracts

We analyze the role of damage clauses in labor contracts using a model in which a worker may want to terminate his current employment relationship and work for another firm. We show that the initial parties to a contract have an incentive to stipulate excessive damage clauses, which leads to ex post inefficiencies. This result is due to rent seeking motives a) between the contracting parties vis-à-vis third parties and b) among the contracting parties themselves. We then show that, by imposing an upper bound on the amount of enforceable damages, a regulator can induce a Pareto improvement; in some cases even the first best can be achieved

Sprache
Englisch

Erschienen in
Series: IZA Discussion Papers ; No. 2367

Klassifikation
Wirtschaft
Thema
Arbeitsvertrag
Vertragsrecht
Rent Seeking
Verhandlungstheorie

Ereignis
Geistige Schöpfung
(wer)
Muehlheusser, Gerd
Ereignis
Veröffentlichung
(wer)
Institute for the Study of Labor (IZA)
(wo)
Bonn
(wann)
2006

Handle
URN
urn:nbn:de:101:1-20090406316
Letzte Aktualisierung
10.03.2025, 11:45 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Muehlheusser, Gerd
  • Institute for the Study of Labor (IZA)

Entstanden

  • 2006

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