Work detail

Disequilibrium in Labour Market as Conseuence of Rational Behaviour: Model of Substitutional Relation between Level of Income and Quality of Monitoring

Author: PhDr. Julie Chytilová
Year: 2004 - summer
Leaders: † RNDr. Miron Tegze CSc.
Consultants:
Work type: Doctoral
Language: Czech
Pages: 73
Awards and prizes:
Link:
Abstract: The main field of concern for an employer is limited enforcability of emloyee's work-quality resulting from incomplete character of contracts on the labor market. There are two types of instruments the employer has at hand while motivating employees for higher efficiency -- highering the wages as a carrot and monitoring as a stick. These two instruments can be mutually substitutable. The more costly the supervision is, the more convenient for the employer is to substitute it by the wage increase. The key determinant for wage level of individual employee is not only the labor productivity, which is usually considered, but the degree of monitoring costs as well. The above mentioned approach allows us to explain the existence of above-equilibrium wage level in the environment of rational behavior. We are not dealing with a labor market failure, the employers maximize their profits. As consequence there is involuntary unemployment on the labor market. Therefore, this paper gives a theoretical justification for its existence in the long-run in contrary to the simple models of perfectly competitive labor market. The following microeconomic analysis aims to contribute in the discussion of an important problem faced by the majority of the modern economies today.

Partners

Deloitte

Sponsors

CRIF
McKinsey
Patria Finance