Journal ArticleDOI
Bonus Payments, on-the-Job Training, and Lifetime Employment in Japan
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TLDR
In this paper, a model of on-the-job training is developed to analyze the determination of the amounts and the sharing of investment in specific human capital, and the model predicts that increased profitability of investment leads to an increased bonus-earnings ratio.Abstract:
The prevalence in Japan of flexible wages in the form of bonus payments is explained by a high profitability of investment in specific human capital together with the low costs of transactions facing the employer and the worker in assessing fluctuations in productivities. A model of on-the-job training is developed to analyze the determination of the amounts and the sharing of investment in specific human capital. The model predicts that increased profitability of investment leads to an increased bonus-earnings ratio. Evidence indicates that education and firm size, which are often said to be positively associated with the profitability of on-the-job training in Japan, as well as years of experience in the current firm, have significant positive associations with the bonus-earnings ratio. An observed positive association between the cyclical sensitivities in a production index and in the bonus-earnings ratio also supports the theory.read more
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Journal ArticleDOI
The Structure of Wages and Investment in General Training
TL;DR: In the human capital model with perfect labor markets, firms never invest in general skills and all cost of general training are borne by workers as mentioned in this paper. But when lobor market frictions compress the structure of the labor market, the costs of general skills are increased.
Posted Content
Firm-Specific Human Capital as a Shared Investment
TL;DR: In this paper, a formal statement of the sharing model is presented, and a systematic analysis of the incentive to share the investment in firm-specific human capital is performed, revealing that whether or not the investment is shared depends on the existence in the post-investment years of costs of evaluating and agreeing on the worker's productivities in the firm and elsewhere.
Journal ArticleDOI
Two-Sided Uncertainty and "Up-or-Out" Contracts
Charles M. Kahn,Gur Huberman +1 more
TL;DR: In this article, a bilateral moral hazard problem was proposed for "up-or-out" employment contracts, where the employer sets a wage higher than opportunity cost to induce the worker to invest in firm-specific capital.
Applied Research Branch Strategic Policy Human Resources Development Canada
Bruno Rainville,Satya Brink +1 more
Journal ArticleDOI
Contingent Pay and Managerial Performance
Lawrence M. Kahn,Peter D. Sherer +1 more
TL;DR: This paper examined the relationship between financial incentives and performance and found that bonuses for managers who are incentivized to be more successful were higher than those who were not incentivised to be successful.
References
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Implicit Contracts and Underemployment Equilibria
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Wages and Employment under Uncertain Demand
TL;DR: In this paper, the authors examine some implications of two postulates for firms' wage and employment policies, namely that firms or stockholders have easier access to capital markets at lower costs or higher returns than do small investors, such as workers, and that there are important mobility and turnover costs incurred when a worker moves from one firm to another.