Why Do Firms Pay an Overtime Premium?

Arbeitspapier

We develop a rationale for the payment by firms of a wage premium on marginal, or overtime, weekly hours. We examine wage-hours contracts within the framework of a two-period specific human capital model with asymmetric information. The wage premium serves to achieve contract efficiency. For those weekly hours for which a premium is paid, worker compensation exceeds the value of marginal product. There is an optimal automatic compensatory differential rule between straight-time wages and the premium, and this provides new theoretical insights into recent empirical work in this area. Implications of imposing mandatory rules for premium pay and hours of work are also assessed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 163

Classification and Topics

• Classification: Wirtschaft ; Labor Contracts ; Compensation Packages; Payment Methods
• Subject: Overtime premium ; human capital ; asymmetric information ; mandatory overtime rules ; Überstunden ; Arbeitsvertrag ; Effizienzlohn ; Humankapital ; Asymmetrische Information ; Unvollständiger Vertrag ; Theorie

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Hart, Robert A. ; Ma, Yue
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/21005
• Last update: 20.09.2024, 8:21 AM CEST