Within a hierarchical firm structure, this paper details how the composition of a worker's skills and the non-observability of a worker's ability affect wage and promotion paths. Promotion-based compensation schemes derive naturally from the worker's asymmetrically observed ability. Promotion takes place over time and is inefficient since employers strategically exploit their knowledge of an able worker's ability. Conversely, employers may be unable to efficiently demote and retain bad managers without paying bonuses. Employers are led to promote educated employees before their equally or more able, but uneducated, counterparts. Explanations for fast-track promotions plans, and other empirical regularities are provided.

This paper examines the contract between a risk-neutral firm and its risk-averse employees, assuming that worker ability is privately learned by the firm after a period of employment. Employers in an external spot labor market attempt to infer worker quality from the observable actions taken by the firm. The threat of spot market raids distorts the optimal contract. Layoffs may be involuntary and can exceed efficient levels. A seniority layoff rule may be included in the contract to avoid the adverse selection problems that arise if layoffs are conducted on the basis of ability.

This paper investigates the response of the price level to random monetary shocks through a model of the fixed cost of changing a nominal price. It shows that in an inflationary environment, an expansionary monetary shock is accommodated faster than a contractionary monetary shock. Furthermore, when the average rate of monetary expansion increases, the lag in response to a positive shock decreases. The study also proves that the relationship between the expected rate of inflation and the variance of real prices is positive only above a critical level of expected inflation.

Agents expect to trade with each other infinitely often, but face a temporal absence of a coincidence of wants when they meet. Only loans and/or money can facilitate exchange. In small close-knit economies, enduring trade relationships are valued and loans are optimal. In larger economies, with limited communication, information concerning repayment of loans diffuses too slowly to deter agents from reneging unless loans are severely restricted in magnitude. Money has no such redeemability problems, but if Clower constraints bind, loans help supplement money purchases so that both become essential. Roles of various institutions and the historical evolution of media of exchange are explained.

Journal Article Pay Dispersion, Information, and Returns to Search in a Professional Labour Market Get access David Metcalf David Metcalf London School of Economics Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 40, Issue 4, October 1973, Pages 491–505, https://doi.org/10.2307/2296583 Published: 01 October 1973

Journal Article Inefficiency and the Demand for “Money” in a Sequence Economy Get access David Starrett David Starrett Harvard University Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 40, Issue 4, October 1973, Pages 437–448, https://doi.org/10.2307/2296579 Published: 01 October 1973

Journal Article The Closed Linear Model of Production: A Note Get access D. Glycopantis D. Glycopantis The City University, London Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 37, Issue 2, April 1970, Pages 295–297, https://doi.org/10.2307/2296422 Published: 01 April 1970 Article history Received: 01 August 1968 Accepted: 01 March 1969 Published: 01 April 1970

Journal Article A Geometric Duality Theorem with Economic Applications Get access D. Gale D. Gale University of California, Berkeley Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 34, Issue 1, January 1967, Pages 19–24, https://doi.org/10.2307/2296568 Published: 01 January 1967

Further Considerations of the General Equilibrium Theory of Money Get access Don Patinkin Don Patinkin Jerusalem Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 19, Issue 3, 1952, Pages 186–195, https://doi.org/10.2307/2296021 Published: 01 January 1952