Credit, Incentives and Reputation: A Hedonic Analysis of Contractual Wage Profiles
JOURNAL OF POLITICAL ECONOMY, Vol. 104, No. 6, December 1996
Posted: 13 Nov 1996
A hedonic analysis of principal-agent employment contracts is developed in which workers and employers exchange labor services and contractual payment patterns and is applied to contract data from a household-level survey in rural China in 1935. The results indicate that credit market constraints motivated workers' and employers' contract choices, that shirking by workers rather than by employers was the dominant incentive issue, that reputational concerns rather than threats of termination were the key worker-disciplining device, and, finally, that a contract's third party acted as an enforcement device rather than as a matchmaker.
JEL Classification: C72, C78, J41
Suggested Citation: Suggested Citation