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Journal Article

Wage-hours contracts, overtime working and premium pay

Authors

Publication date

2010

Abstract

This paper offers a contract-based theory to explain the determination of standard hours, overtime hours and overtime premium pay. We expand on the wage contract literature that emphasises the role of firm-specific human capital and that explores problems of contract efficiency in the face of information asymmetries between the firm and the worker. We first explore a simple wage-hours contract without overtime and show that incorporating hours into the contract may itself produce efficiency gains. We then show how the introduction of overtime hours, remunerated at premium rates, can further improve contract efficiency. Our modelling outcomes in respect of the relationship between the overtime premium and the standard wage rate relate closely to earlier developments in hedonic wage theory. Throughout, we emphasise the intuitive reasoning behind the theory and we also supply relevant empirical evidence. Mathematical derivations are provided in an appendix.

Published in

Labour Economics

Volume

17 (1):170-179

DOI

http://dx.doi.org/10.1016/j.labeco.2009.04.002

Subjects

Labour Economics and Wages And Earnings

Links

http://serlib0.essex.ac.uk/record=b1650556~S5

Notes

Previously 'In press, corrected proof' 21 Apr. 2009; Albert Sloman Library Periodicals *restricted to Univ. Essex registered users*

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