Journal of Labor Economics Vol. 6 No. 1 1988
Information Revelation and Principal-Agent Contracts
Abstract
In an environment in which effort is private information to the worker, agreements between a risk-neutral principal and a risk-averse agent are likely to be risk-sharing and information-revealing mechanisms. It is shown that principal-agent contracts have significant implications for both compensation and employment rules in a simple work-sharing model. In general, such contracts involve incomplete income insurance and involuntary or excessive underemployment. This supports the view that models of worker-specific information, particularly with moral hazard, provide a natural explanation of underemployment.
- DOI
- 10.1086/298178
- Volume
- 6
- Issue
- 1
- Pages
- 132-146
- Language
- en
- Sources
- openalex crossref