Managerial Accountability for Payroll Expense and Firm-Size Wage Effects

We argue that job performance appraisal is an agency problem with asymmetric transfer values: an employee is paid in proportion to the rating received from his line manager, who only partially internalizes the resultant payroll cost. This asymmetry in rating valuations is based on evidence that managers are not fully accountable for payroll expense, with the degree of unaccountability increasing in firm size. We develop a nested agency model of economic organization of a firm with unaccountable managers, which in equilibrium obtains the firm-size wage effects - the large-firm wage premium and inverse relationship between firm size and wage dispersion

Loss aversion, labor supply, and income taxation

We assume that taxpayers are loss averse in reference to other taxpayers’ consumption. Loss aversion implies that labor supply responses to taxation depend on the taxpayer's position in the income distribution. Consistent with empirical evidence, we find the steeper the ascent on the curve of income distribution, the smaller the labor supply elasticity. In the standard problem of optimal income taxation, the role of income distribution is to aggregate the labor supply effects of taxation. We show that loss aversion can offset the aggregation role of income distribution resulting in a greater role for social concerns.</p

Contingent Wage Subsidy

This paper proposes a policy aimed at tackling unemployment that arises from macroeconomic coordination failure. The policy offers firms wage subsidies payable only if the total number of new hires made across the economy is below a prespecified threshold. Subsidies provide incentives for firms to create jobs but the policy's goal is to generate a sufficiently large amount of employment spillovers to set off hiring complementarities taking employment beyond the threshold. Thus, subsidies are not distributed but the policy achieves a Pareto improvement. The market structure is important for policy design. Aggregative game techniques prove useful for the oligopsonistic case.</p

Donation-Based Crowdfunding with Refund Bonuses

We study donation-based crowdfunding for threshold public good provision. Our main focus is on an extension with refund bonuses aimed at resolving the problems of equilibrium coordination and free riding. In the case of insufficient contributions, contributors not only have their contributions refunded but they also receive refund bonuses proportional to their pledged contributions. Thus, refund bonuses encourage more contributions but ultimately enough is raised given sufficient preference for the public good and in equilibrium no bonuses need to be paid. We test the predicted effects of refund bonuses in an experiment using a laboratory-based crowdfunding platform that features many main aspects of real-life platforms. Our main empirical result is that refund bonuses substantially increase the rate of funding success when contributors can support multiple projects. Furthermore, our findings also demonstrate that refund bonuses lead to significant economic gains even after accounting for their costs.</p

On Equilibrium in Monopolistic Competition with Endogenous Labor

We consider a model of monopolistic competition with several heterogeneous sectors and endogenous labor supply. For low (high) values of the labor supply elasticity, we show that there is always a unique equilibrium. For medium values of the labor supply elasticity, there are either zero or two equilibria

Early Refund Bonuses Increase Successful Crowdfunding

The assurance contract mechanism is often used to crowdfund public goods. This mechanism has weak implementation properties that can lead to miscoordination and failure to produce socially valuable projects. To encourage early contributions, we extend the assurance contract mechanism with refund bonuses rewarded only to early contributors in the event of fundraising failure. The experimental results show that our proposed solution is very effective in inducing early cooperation and increasing fundraising success. Limiting refund bonuses to early contributors works as well as offering refund bonuses to all potential contributors, while also reducing the amount of bonuses paid. We find that refund bonuses can increase the rate of campaign success by 50% or more. Moreover, we find that even taking into account campaign failures, refund bonuses can be financially self-sustainable suggesting the real world value of extending assurance contracts with refund bonuses