Wage-hours contracts, overtime working and premium pay

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)170-179
Journal / PublicationLabour Economics
Volume17
Issue number1
Publication statusPublished - Jan 2010
Externally publishedYes

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. © 2009 Elsevier B.V. All rights reserved.

Research Area(s)

  • Asymmetric information, Overtime, Premium pay, Specific human capital, Wage-hours contracts

Citation Format(s)

Wage-hours contracts, overtime working and premium pay. / Hart, Robert A.; Ma, Yue.

In: Labour Economics, Vol. 17, No. 1, 01.2010, p. 170-179.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal