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on Contract Theory and Applications |
| By: | Nilsson, Jan-Eric (Swedish National Road & Transport Research Institute (VTI)); Odolinski, Kristofer (Swedish National Road & Transport Research Institute (VTI)); Nyström, Johan (NYFOU) |
| Abstract: | One of the consequences of the institutional separation of railway infrastructure from train operations in Europe is a misalignment of incentives in which the actions of one party may create costs for the other. To internalise otherwise external costs of track-works experienced by train operators and customers, it is essential to reform the way in which project contracts are tendered. This study suggests a self-selection mechanism for tendering rail infrastructure activities. Bidders may therefore submit bids based on the industry’s standard Unit Price Contract or a Fixed-Price Contract. The mechanism is designed to increase the possibility for a welfare maximising trade-off between construction and user costs. Using standard Benefit-Cost principles and parameter values, a case study where five switches are replaced provides substance to the discussion. The study provides a starting point for addressing risk in the construction industry and a blueprint for further development by professionals to fill in gaps and to test the approach under a controlled format before full-scale implementation. |
| Keywords: | Procurement; Risk; Rail infrastructure; Vertical separation; Delay fee; Unit price contract; Fixed-price contract |
| JEL: | H57 R42 R48 |
| Date: | 2023–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2023_010&r=cta |
| By: | Aparicio Fenoll, Ainoa (University of Turin); Quaranta, Roberto (Collegio Carlo Alberto) |
| Abstract: | Previous literature on the effect of tenured and tenure-track vs. non-tenure-track professors on students' performance at university finds contrasting results. Our paper is the first to test whether tenured/tenure-track and non-tenure-track teachers differently affect students' performance at school. We use data on standardized test scores of a representative sample of primary and secondary school students in Italy and information on their Italian and mathematics teachers' labor contracts. Controlling for class- and subject-fixed effects, we find that non-tenure-track teachers decrease students' performance by 0.21 standard deviation. This detrimental effect is fully explained because non-tenure-track teachers are less experienced. In line with previous findings on the adverse effects of teachers' absences, non-tenure-track teachers are also associated with 0.1 standard deviation worse student performance when their contracts last less than a year. |
| Keywords: | teachers, labor contracts, students' performance, standardized tests |
| JEL: | J41 H52 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16380&r=cta |
| By: | Nicholas C Bedard; Jacob K Goeree; Ningyi Sun |
| Abstract: | We introduce a definition of multivariate majorization that is new to the economics literature. Our majorization technique allows us to generalize Mussa and Rosen's (1978) "ironing" to a broad class of multivariate principal-agents problems. Specifically, we consider adverse selection problems in which agents' types are one dimensional but informational externalities create a multidimensional ironing problem. Our majorization technique applies to discrete and continuous type spaces alike and we demonstrate its usefulness for contract theory and mechanism design. We further show that multivariate majorization yields a natural extension of second-order stochastic dominance to multiple dimensions and derive its implications for decision making under multivariate risk. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.13804&r=cta |
| By: | DongIk Kang; Miles S. Kimball |
| Abstract: | This paper studies the optimal wage structure of a firm with imperfect monitoring of worker effort. We find that when firms can commit to (implicit) long-term contracts, imperfect monitoring leads to optimal wage profiles that reflect worker seniority. We provide a precise measure of seniority as a ratio of co-state variables and illustrate how this measure of seniority evolves over the worker’s tenure with the firm and how it affects wages, effort, monitoring intensity and separation rates. We also show how earnings loss from unemployment reflects seniority and how optimal monitoring intensity, amenities and on-the-job training evolve with seniority. |
| JEL: | J0 J31 J32 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31563&r=cta |
| By: | Alexander Hijzen |
| Abstract: | This paper provides an assessment of the 2019 minimum-wage hike in Spain, which increased the minimum wage by 22% and directly concerned 7% of dependent employees. The assessment is based on an individual-level analysis that follows the outcomes of workers that were employed in the year before the reform over time. Among directly affected workers, the hike in the minimum wage increased full-time equivalent monthly earnings by on average 5.8% and reduced employment by -0.6%. The wage effects are stronger for workers on open-ended contracts, while the employment effects are stronger for workers on fixed-term contracts. |
| Keywords: | employment protection, fixed-term contracts, labour market duality, wage-setting, wage-shifting |
| JEL: | J3 J4 J8 |
| Date: | 2023–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:298-en&r=cta |
| By: | Wenpin Tang; David D. Yao |
| Abstract: | We study a mechanism design problem in the blockchain proof-of-stake (PoS) protocol. Our main objective is to extend the transaction fee mechanism (TFM) recently proposed in Chung and Shi (SODA, p.3856-3899, 2023), so as to incorporate a long-run utility model for the miner into the burning second-price auction mechanism $\texttt{BSP}(\gamma)$ proposed in Chung and Shi (where $\gamma$ is a key parameter in the strict $\gamma$-utility model that is applied to both miners and users). First, we derive an explicit functional form for the long-run utility of the miner using a martingale approach, and reveal a critical discontinuity of the utility function, namely a small deviation from being truthful will yield a discrete jump (up or down) in the miner's utility. We show that because of this discontinuity the $\texttt{BSP}(\gamma)$ mechanism will fail a key desired property in TFM, $c$-side contract proofness ($c$-SCP). As a remedy, we introduce another parameter $\theta$, and propose a new $\texttt{BSP}(\theta)$ mechanism, and prove that it satisfies all three desired properties of TFM: user- and miner-incentive compatibility (UIC and MIC) as well as $c$-SCP, provided the parameter $\theta$ falls into a specific range, along with a proper tick size imposed on user bids. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.13881&r=cta |
| By: | Aneesha Chitgupi (xKDR Forum); Susan Thomas (xKDR Forum) |
| Abstract: | A central choice in public administration is whether to 'make', which is production within the public sector, or 'buy', which is public procurement. While 'buy' has the advantage of harnessing the energy of private firms, it requires state capacity in contracting and leads to questions on how to obtain state capacity in contracting. One measure of state capacity in procurement is the extent of failure to spend resources budgeted for procurement. We construct a novel dataset about spending gaps (between what is budgeted and what is spent) in procurement by the Indian union government. We find that the spending gaps are the smallest when buying goods, and the highest with works. We find that ministries that have a sustained engagement with procurement fare better on obtaining minimum gaps in procurement spending, which suggests a process of learning by doing. |
| JEL: | H57 H83 L33 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:anf:wpaper:22&r=cta |