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Identifier to cite or link to this item: https://doi.org/10.15057/27940
Identifier to cite or link to this item: https://hdl.handle.net/10086/27940

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Title
A NOTE ON ENVY AND EARNINGS INEQUALITY UNDER LIMITED LIABILITY CONTRACTS
Creator
Creator Name
CHOI, KANGSIK CHOI, KANGSIK
Affiliation
Affiliation Name
Pusan National University
Key Word
envy
limited liability
ex-ante contracting
distortion
JEL
D82
J31
M21
Abstract
The paper analyzes an ex-ante contracting with limited liability constraints when agents feel envious of others' higher wages. We show that depending on the degree of limited liability constraints, the principal requires various distortions in output at both the top and bottom productivity levels for agent's type. Compared to the result without envy, the output gap between efficient and inefficient agents is less spread out. Moreover, when the degree of envy is sufficiently large, bunching can always occur. Hence, the first-best solutions for both types of agent are never obtained with envy regardless of the burden of limited liability.
Publisher
Hitotsubashi University
Issued Date
2016-06
Language
English(eng)
Resource Type
departmental bulletin paper
Version Type
VoR
selfDOI
10.15057/27940
ISSN
0018-280x
NCID
AA00207547
Source Title
Hitotsubashi Journal of Economics
Volume Number
57
Issue Number
1
Page Start
91
Page End
109
Appears in Collections
Vol. 57, no. 1 (Jun. 2016)
URL
https://hdl.handle.net/10086/27940