Publication Type
Working Paper
Version
publishedVersion
Publication Date
4-2019
Abstract
We study a continuous-time model of long-run employment relationship with fixed wage and at-will firing; that is, termination of the relationship is non-contractible. Depending on his type, the worker either always works hard, or can freely choose his effort level. The firm does not know the worker’s type and the monitoring is imperfect. We show that, in the unique Markov equilibrium, as the worker’s reputation worsens, his job becomes less secure and the strategic worker works harder. We further demonstrate that the relationship between average productivity and job insecurity is U shaped, which is consistent with typical findings in the organizational psychology literature.
Keywords
moral hazard, job insecurity, reputation, at-will employment
Discipline
Finance and Financial Management | Organizational Behavior and Theory
Research Areas
Finance
First Page
1
Last Page
42
Identifier
10.2139/ssrn.3424122
Citation
SUN, Jian and WEI, Dong.
Reputation concerns under at-will employment. (2019). 1-42.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7038
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.3424122