Minimum Wages and Relational Contracts

The need to give incentives is usually absent in the literature on minimum wages. However, especially in the service sector it is important how well a job is done, and employees must be incentivized to perform accordingly. Furthermore, many aspects regarding service quality cannot be verified, which implies that relational contracts have to be used to provide incentives. The present article shows that in this case, a minimum wage increases implemented effort, i.e., realized service quality, as well as the efficiency of an employment relationship. Hence, this paper can explain why productivity and service quality went up after the introduction of the British National Minimum Wage, and that this might actually have caused a more efficient labor market. Furthermore, several empirically observed implications of a (higher) minimum wage can be explained. It might reduce turnover of employees, have spillover effects on higher wages, and reduce wage dispersion

Household Relational Contracts for Marriage, Fertility and Divorce

This paper applies the theory of relational contracts to a model in which a couple decides whether to marry or cohabit, how many children to have and subsequently whether to stay together or separate. We make precise the idea that cooperation in a household can be supported by self interest. Since the costs of raising children are unequally distributed among partners, there is a potential conflict between individually optimal and efficient, i.e. surplus maximizing, decisions. Side-payments are used to support cooperation but are not legally enforceable and thus have to be part of an equilibrium. This requires a stable relationship and credible punishment threats. Within this relational contracts framework, we analyze the effects of policy variables such as rights of access to children post-separation and wealth division/alimony rules, as well as the legal costs of divorce, on the interrelationships among the decisions on marriage, fertility and divorce.

Dynamical Properties of the Mukhanov-Sasaki Hamiltonian in the context of adiabatic vacua and the Lewis-Riesenfeld invariant

We use the method of the Lewis-Riesenfeld invariant to analyze the dynamical properties of the Mukhanov-Sasaki Hamiltonian and, following this approach, investigate whether we can obtain possible candidates for initial states in the context of inflation considering a quasi-de Sitter spacetime. Our main interest lies in the question to which extent these already well-established methods at the classical and quantum level for finitely many degrees of freedom can be generalized to field theory. As our results show, a straightforward generalization does in general not lead to a unitary operator on Fock space that implements the corresponding time-dependent canonical transformation associated with the Lewis-Riesenfeld invariant. The action of this operator can be rewritten as a time-dependent Bogoliubov transformation and we show that its generalization to Fock space has to be chosen appropriately in order that the Shale-Stinespring condition is not violated, where we also compare our results to already existing ones in the literature. Furthermore, our analysis relates the Ermakov differential equation that plays the role of an auxiliary equation, whose solution is necessary to construct the Lewis-Riesenfeld invariant, as well as the corresponding time-dependent canonical transformation to the defining differential equation for adiabatic vacua. Therefore, a given solution of the Ermakov equation directly yields a full solution to the differential equation for adiabatic vacua involving no truncation at some adiabatic order. As a consequence, we can interpret our result obtained here as a kind of non-squeezed Bunch-Davies mode, where the term non-squeezed refers to a possible residual squeezing that can be involved in the unitary operator for certain choices of the Bogoliubov map.Comment: 40 pages, 5 figures, minor changes: slightly rewrote the introduction, extended the discussion on the infrared modes, corrected typos and added reference

Household Relational Contracts for Marriage, Fertility and Divorce

This paper applies the theory of relational contracts to a model in which a couple decides whether to marry or cohabit, how many children to have and subsequently whether to stay together or separate. We make precise the idea that cooperation in a household can be supported by self interest. Since the costs of raising children are unequally distributed between partners and children are a household public good, there is a conflict between individually optimal and efficient, i.e. surplus maximising, decisions. Side-payments are used to support cooperation but are not legally enforceable and thus have to be part of an equilibrium. This requires a stable relationship and credible punishment threats. Within this framework, we analyze the effects of policy variables such as the costs of divorce and post-divorce income payments on the interrelationships among the decisions on marriage, fertility and divorce

Size Matters - "Over"investments in a Relational Contracting Setting

The corporate finance literature documents that managers tend to overinvest into physical assets. A number of theoretical contributions have aimed to explain this stylized fact, most of them focussing on a fundamental agency problem between shareholders and managers. The present paper shows that overinvestments are not necessarily the (negative) consequence of agency problems between shareholders and managers, but instead might be a second-best optimal response if the scope of court-enforceable contracts is limited. In such an environment a firm has to rely on relational contracts in order to manage the agency relationship with its workforce. The paper shows that investments into physical productive assets enhance the enforceability of relational contracts and hence investments optimally are too high

Household relational contracts for marriage, fertility and divorce

This paper applies the theory of relational contracts to a model in which a couple decides whether to marry or cohabit, how many children to have and subsequently whether to stay together or separate. We make precise the idea that cooperation in a household can be supported by self interest. Since the costs of raising children are unequally distributed among partners, there is a potential conflict between individually optimal and efficient, i.e. surplus maximizing, decisions. Side-payments are used to support cooperation but are not legally enforceable and thus have to be part of an equilibrium. This requires a stable relationship and credible punishment threats. Within this relational contracts framework, we analyze the effects of policy variables such as rights of access to children post-separation and wealth division/alimony rules, as well as the legal costs of divorce, on the interrelationships among the decisions on marriage, fertility and divorce

Teamwork as a Self-Disciplining Device

We show that team formation can serve as an implicit commitment device to overcome problems of self-control. In a situation where individuals have present-biased preferences, any effort that is costly today but rewarded at some later point in time is too low from the perspective of an individual's long-run self. If agents interact repeatedly and can monitor each other, a relational contract involving teamwork can help to improve an agent's performance. The mutual promise to work harder is credible because the team breaks up after an agent has not kept this promise - which leads to individual (under-) production in the future and reduces an agent's future utility. This holds even though the standard free-rider problem is present and teamwork renders no technological benefits. Moreover, we show that even if teamwork does render technological benefits, the performance of a team of present-biased agents can actually be better than the performance of a team of time-consistent agents

The Commitment Role of Equity Financing

Existing theories of a firm's optimal capital structure seem to fail in explaining why many healthy and profitable firms rely heavily on equity financing, even though benefits associated with debt (like tax shields) appear to be high and the bankruptcy risk low. This holds in particular for firms that show a strong commitment towards their workforce and are popular among employees. We demonstrate that such financing behavior may be driven by implicit arrangements made between a firm and its managers/employees. Equity financing generally strengthens a firm's credibility to honor implicit promises. Debt, on the other hand, has an adverse effect on the enforceability of these arrangements because too much debt increases the firm's reneging temptation, as some of the negative consequences of breaking implicit promises can be shifted to creditors. Our analysis provides an explanation for why some firms only use little debt financing. Predictions made by our theory are in line with a number of empirical results, which seem to stay in contrast to existing theories on capital structure. Our findings also carry new implications for how policies (e.g., tax policy) affect firm behavior

Laserlight visual cueing device for freezing of gait in Parkinson's disease: a case study of the biomechanics involved

AbstractBackground: Freezing of gait (FOG) is a serious gait disorder affecting up to two-thirds of people with Parkinson's disease (PD). Cueing has been explored as a method of generating motor execution using visual transverse lines on the floor. However, the impact of a laser light visual cue remains unclear. Objective: To determine the biomechanical effect of a laser cane on FOG in a participant with PD compared to a healthy age- and gender-matched control. Methods: The participant with PD and healthy control were given a task of initiating gait from standing. Electromyography (EMG) data were collected from the tibialis anterior (TA) and the medial gastrocnemius (GS) muscles using an 8-channel system. A 10-camera system (Qualisys) recorded movement in 6 degrees of freedom and a calibrated anatomical system technique was used to construct a full body model. Center of mass (COM) and center of pressure (COP) were the main outcome measures. Results: The uncued condition showed that separation of COM and COP took longer and was of smaller magnitude than the cued condition. EMG activity revealed prolonged activation of GS, with little to no TA activity. The cued condition showed earlier COM and COP separation. There was reduced fluctuation in GS, with abnormal, early bursts of TA activity. Step length improved in the cued condition compared to the uncued condition. Conclusion: Laserlight visual cueing improved step length beyond a non-cued condition for this patient indicating improved posture and muscle control

How Blackwater Takes Uncle Sam for a Ride - and Why He Likes It

Private Military and Security Companies (PMSCs) have been gaining increasing media and scholarly attention particularly due to their indispensable role in the wars in Afghanistan 2001 and Iraq 2003. Nevertheless, theoretical insights into the agency problems inherent when hiring PMSCs and how to optimally incentivize them are scarce. We study the complex relationship between intervening state, host state, and PMSC, taking into account the diverging interests of all involved parties as well as potential agency problems. We develop a theoretical model to characterize a state’s optimal choice whether to perform a task associated with an intervening mission itself, hire a PMSC and optimally design the contract, or completely abstain from it. We find that it might be optimal to hire PMSCs even if they are expected to do a worse job than the intervening state would do itself. This outcome is especially problematic for the host state, which prefers associated tasks to be done as good and carefully as possible. Furthermore, the often-heard call for transparency regarding agreements with PMSCs can lead to a situation where the latter’s performance gets even worse - namely because the ability to implicit reward PMSCs for a good performance in the past is reduced