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on Contract Theory and Applications |
| By: | Rosella Levaggi (Department of Economics and Management, University of Brescia); Michele Moretto (Department of Economics and Management, University of Padua); Paolo Pertile (Department of Economics, University of Verona) |
| Abstract: | This paper aims to characterise a dynamic, incentive-compatible contract for the provision of health services, allowing for both moral hazard and adverse selection. Patients’ severity changes over time following a stochastic process and is private information of the provider. We characterise the optimal dynamic contract and show that it is made up of two components: a time-invariant payment, which depends on the structural characteristics of the provider, and a time-varying component, which is affected by both patient and hospital characteristics. To illustrate the characteristics of the dynamic contract and compare it with a more standard static contract, we provide a numerical exercise calibrated with data from hip replacement hospitalisations in Italy. |
| Keywords: | hospital payments, dynamic mechanism design, DRG, two-part tariffs, adverse selection, moral hazard |
| JEL: | H42 I18 D82 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2023.16&r=cta |
| By: | Grasso, Giuseppe (University of Luxembourg, LISER); Tatsiramos, Konstantinos (University of Luxembourg, LISER) |
| Abstract: | This paper examines the impact of increasing the relative cost of fixed-term contracts on labor demand as well as the demand for standard measures of human capital and specific skill requirements. We evaluate a 2018 Italian labor law reform that raised the cost of fixed- term contracts while keeping permanent contract costs unchanged. We employ a difference-in-differences research design, leveraging the variation in firms' exposure to the reform resulting from their diverse reliance on fixed-term contracts due to differing reactions to earlier labor market reforms. Using rich data covering the near universe of online job vacancies in Italy, our findings indicate that the increase in hiring costs for temporary contracts led to a decrease in the relative demand for temporary workers and an increase in the demand for permanent workers. This shift in demand was accompanied by upskilling towards workers with higher levels of human capital and specific skill requirements. When offering jobs under permanent contracts, firms increased their demand for workers with a college degree and social skills. At the same time, they reduced their demand for workers with only a high school degree and no work experience. On the other hand, when offering jobs under fixed-term contracts, firms increased their demand for workers with some work experience and social skills. These findings suggest that while restricting fixed-term contracts encouraged the hiring of permanent workers, such reforms might have unintended consequences by raising the hiring standards for job entry, thereby reducing employment opportunities for less qualified workers. |
| Keywords: | hiring costs, employment protection, dual labor markets, skills |
| JEL: | J23 J24 J63 K31 |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16496&r=cta |
| By: | Ichihashi Shota; Smolin Alex |
| Abstract: | We analyze a bilateral trade model in which the buyer's value for the product and the seller's costs are uncertain, the seller chooses the product price, and the product is recommended by an algorithm based on its value and price. We characterize an algorithm that maximizes the buyer's expected payoff and show that the optimal algorithm underrecommends the product at high prices and overrecommends at low prices. Higher algorithm precision increases the maximal equilibrium price and may increase prices across all of the seller's costs, whereas informing the seller about the buyer's value results in a mean-preserving spread of equilibrium prices and a mean-preserving contraction of the buyer's payoff. |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2309.12122&r=cta |