This paper addresses the First Theorem of Welfare Economics in a moral hazard environment. An entrepreneur sells equity in a firm which he supplies with an unobservable, costly input. How much equity he retains determines his incentives and is observed by investors. The investors have rational expectaions which cause the equity price to increase in the amount of equity the entrepreneur retains. This gives the entrepreneur an incentive to retain equity and hence supply input. The entrepreneur may also be bound by an explicit incentive contract. In this framework, not all competitive equilibria are efficient, as defined relative to the moral hazard constraint. However, equilibria can be inefficient only if the entrepreneur's optimal input is nonunique or exhibits positive income effects

Accounting-based dividend constraints in lending contracts are imperfect means of mitigating conflicts of interests between stockholders and bondholders since managers have flexibility to make accounting decisions to circumvent the covenants. This paper documents firms' accounting and dividend responses to an increase in the tightness of dividend constraints. Firms cut dividends and do not appear to make accounting changes to circumvent the dividend restriction. The magnitude of the dividend cut is proportional to the tightness of the dividend constraint. This suggests that accounting-based covenants are effective means for bondholders to restrict firmsś dividend policies

This paper's results are consistent with the choice of accounting method in the oil and gas industry being dominated by measurable characteristics of firms and guided by the principles of efficient contracting. The results are inconsistent with an alternative hypothesis, opportunistic behavior by managers. The efficient contracting explanation is also consistent with the empirical findings from earlier studies; [e.g., Lilien and Pastena (1982) and Deakin 1979

This article investigates cyclicality in real wages between 1969 and 1982, using Panel Study of Income Dynamics data. There is little evidence that movements in and out of the labor market induced aggregate wage cyclicality during these years. However, cyclicality in the movement of workers between heterogeneous labor-market sectors affected aggregate wage cyclicality. While sector location is important, sector selectivity is not correlated with wages. Yet, even within sectors, cyclicality is present in real wages over this time period and is the result of cyclicality in overall wage levels, as well as in the coefficients associated with particular worker characteristics.

This article investigates the effect of external, national, and sectoral shocks on Canadian employment fluctuations at the national, industrial, and provincial levels. We assume that employment growth in each industry-province pair depends on U.S. growth, lagged Canadian growth at the national, industrial, and provincial levels, an aggregate shock, and shocks specific to each industry, province, and industry-province pair. We estimate that the U.s. and Canadian shocks account for two-thirds and a quarter, respectively, of aggregate variation. Sectoral shocks account for only one-tenth of aggregate variation but represent 30% of the variation from Canadian sources.

The "job-stopping" process of older workers often includes some combination of postcareer "bridge" employment, partial retirement, and reverse retirement. Fewer than two-fifths of household heads retire directly from career jobs, over half partially retire at some point in their working lives, and a quarter reenter the labor force after initially retiring. In addition, postcareer employment is frequently located outside the industry and occupation of the career job, and there are important differences in postcareer labor force experiences by gender, permanent income, and career-job pension status

There is much variation in the union/nonunion wage gap across groups of workers within each of the two sectors, public and private. Furthermore, the variation in the public sector does not parallel in all of its detail that in the private sector. Thus, though the public-sector gaps typically are somewhat below their private-sector counterparts, there are important exceptions to this difference, especially among employees of local governments: public school teachers, clerical workers, refuse collectors, local transit bus drivers, licensed practical nurses, hospital technicians, nonprofessional hospital workers, and undoubtedly some others.

This article examines a model of "semiefficient" bargaining in which the union and the firm bargain over wages and various types of work rules. The results are compared to the outcomes that are associated with fully efficient bargaining (i.e., over wages and the level of employment) and bargaining solely over wages