John Douglas Skåtun

Take some days off, why don't you?: Endogenous sick leave and pay

This is a model of endogenous sick leave in the presence of endemic infectious diseases. The prevalence rate elasticity with respect to sick leave is unity, when workers are paid their marginal product, and firms profit maximise. Full information contracts yield a compensating higher wage to the sick than to the healthy workers. Sick leave pay is greater than the healthy working wage. The contracted sick leave period falls with: the external disease transmission, the productivity of the ill, the discomfort when ill on sick leave and reductions in the work discomfort of the ill. Full insurance breaks down under asymmetric information, where implicit contract firms may offer more sick leave than profit maximising firms with the same payment schedule.

Divide the hours and conquer the surplus: part-time workers and pay

Abstract A theory is presented, where the firm strategically over-employs part-time workers. Reductions in labor taxes, increases in the workers bargaining strength or reductions in their outside employment opportunities will all increase the level of part-time work.

Delegation, Union Leaders and Capital Allocation

This paper looks upon the effects of delegation of the bargaining process within unions. It investigates the allocation of capital when investment is sunk and there is an absence of binding contracts. Although capital investment is inefficient, capital allocation can be improved by precommitment. Strong union members precommit by hiring a weak leader, whilst weak union members hire a strong union leader. Governments can increase the efficiency of capital by reducing the intrinsic union strength, but could reduce the efficiency of capital if intrinsic internal union leader strength is reduced. Copyright Fondazione Giacomo Brodolini and Blackwell Publishers Ltd. 1997.

Contracting with a trade union leader interface

Looks at a union model where a trade union leader represents union members in dealing with the firm. The union leader is risk neutral and derives his utility solely from the union fees. The employment level is efficient, and equivalent to the contracts without a union leader, when the unemployed receive severance pay and wages and employment is included in the contract. In this case the outcome of the contract does not depend on whether severance pay is paid by the firm or is as a result of internal redistribution of income from employed to unemployed members. In contrast with the efficient bargaining literature, less than efficient levels of employment arise if severance pay is excluded. It is in the interest of the union leader that the unemployed receive no severance pay. This leads to a conflict of interest between the union leader and the members of the union.

The overprovision of infectious disease medicine

Abstract This paper demonstrates a so far ignored negative externality imposed by the provision of life prolonging drugs to infected carriers of infectious diseases. Private optimal usage tends to imply socially inefficient over-provision of life enhancing infectious disease medication.

Altruism, union utility and outsiders

Provides a general approach for the incorporation of the influence of insiders and outsiders in the union utility. In particular, the specification is such that the weight of the influence of the outsiders can vary; and this makes it possible to consider different degrees of union altruism and also to embrace all the previous work on the subject. Examines both the monopoly union and the efficient bargain cases. Comparative statics analysis provides some interesting results, such as that wages are more inflexible downwards.

Performance Related Pay, Efficiency Wages and the Shape of the Tenure-Earnings Profile

Whilst it is well known that performance-related pay (PRP) may increase wage inequality within a firm, there is an inter-temporal lifecycle aspect that has been largely ignored in the literature. In this paper, we investigate theoretically how the introduction of PRP will influence the wage and remuneration profile over time. We develop a simple two-period model of efficiency wages that rationalizes recent empirical findings suggesting PRP flattens the pay-tenure profile. Such attenuation has important implications for the credibility of long-term employment contracts as it suggests that agency rather than human capital considerations drive the profile.

Shirking, Standards and the Probability of Detection

By relaxing the common efficiency wage assumption of exogenous shirking detection probabilities, we demonstrate how standards and efficiency wages are related. In a more general setting where the probability of detection depends upon the equilibrium effort level of non-shirkers, we show that the uniformly positive (negative) supply-side relationship between wages (unemployment insurance) and effort is no longer guaranteed. Profit maximization on the part of the firm, however, ensures that effort will depend positively (negatively) on wages (unemployment insurance) in equilibrium.

Real and perceived losses from unemployment: a cross-country study

This article compares the Unemployment Rate (UR) as a measure of inefficiency with several other potential measures across 18 Organization for Economic Co-operation and Development (OECD) countries. Results show that the UR is not a very good measure of relative inefficiency between countries, it overestimates the number of individuals who would get jobs if the market is clear, the Dead Weight Losses (DWLs) of UR are remarkably low even in high unemployment countries and the aggregate perceived monetary losses by the unemployed as a proportion of Gross Domestic Product (GDP) are also uniformly low, although inframarginal individuals in some countries may perceive their losses to be high.

Personnel Decisions, Wage Profiles and Investment in Firms

An investment model where firms mitigate adverse hold‐up effects using hiring and personnel policies is theoretically investigated and empirically scrutinized. While no evidence for the prediction of differing worker characteristics, other than gender, across firms is found, demand (firm) side factors are evident in the hiring process. Evidence on other personnel policies is consistent with theory, which predicts firms with high‐investment expenditures resist unions, utilize more temporary and shift‐time workers and conduct more multitask training. Wages in high‐investment firms are higher, more sensitive to unemployment and experience variables that exhibit greater effects than in low‐investment firms.