TY - JOUR
T1 - Wage-hours contracts, overtime working and premium pay
AU - HART, Robert A.
AU - MA, Yue
PY - 2010/1/1
Y1 - 2010/1/1
N2 - This paper offers a contract-based theory to explain the determination of standard hours, overtime hours and overtime premium pay. We expand on the wage contract literature that emphasises the role of firm-specific human capital and that explores problems of contract efficiency in the face of information asymmetries between the firm and the worker. We first explore a simple wage-hours contract without overtime and show that incorporating hours into the contract may itself produce efficiency gains. We then show how the introduction of overtime hours, remunerated at premium rates, can further improve contract efficiency. Our modelling outcomes in respect of the relationship between the overtime premium and the standard wage rate relate closely to earlier developments in hedonic wage theory. Throughout, we emphasise the intuitive reasoning behind the theory and we also supply relevant empirical evidence. Mathematical derivations are provided in an Appendix.
AB - This paper offers a contract-based theory to explain the determination of standard hours, overtime hours and overtime premium pay. We expand on the wage contract literature that emphasises the role of firm-specific human capital and that explores problems of contract efficiency in the face of information asymmetries between the firm and the worker. We first explore a simple wage-hours contract without overtime and show that incorporating hours into the contract may itself produce efficiency gains. We then show how the introduction of overtime hours, remunerated at premium rates, can further improve contract efficiency. Our modelling outcomes in respect of the relationship between the overtime premium and the standard wage rate relate closely to earlier developments in hedonic wage theory. Throughout, we emphasise the intuitive reasoning behind the theory and we also supply relevant empirical evidence. Mathematical derivations are provided in an Appendix.
KW - Asymmetric information
KW - Overtime
KW - Premium pay
KW - Specific human capital
KW - Wage-hours contracts
UR - http://commons.ln.edu.hk/sw_master/6650
UR - http://www.scopus.com/inward/record.url?scp=73549104809&partnerID=8YFLogxK
U2 - 10.1016/j.labeco.2009.04.002
DO - 10.1016/j.labeco.2009.04.002
M3 - Journal Article (refereed)
SN - 0927-5371
VL - 17
SP - 170
EP - 179
JO - Labour Economics
JF - Labour Economics
IS - 1
ER -