Regulating damage clauses in (labor) contracts
By: by Gerd Muehlheusser
Series: Discussion paper -- no. 2367; Discussion paper (Forschungsinstitut zur Zukunft der Arbeit : Online) -- no. 2367
Publisher: IZA
Published: 2006
Place of publication: Bonn, Germany
Language: eng
Format: [electronic resource] /
Subjects: Collective labor agreements; Labor contract
Description: "We analyze the role of damage clauses in labor contracts using a model in which a worker may want to terminate his current employment relationship and work for another firm. We show that the initial parties to a contract have an incentive to stipulate excessive damage clauses, which leads to ex post inefficiencies. This result is due to rent seeking motives a) between the contracting parties vis--̉vis third parties and b) among the contracting parties themselves. We then show that, by imposing an upper bound on the amount of enforceable damages, a regulator can induce a Pareto improvement; in some cases even the first best can be achieved"--Forschungsinstitut zur Zukunft der Arbeit web site.
Notes: Title from PDF file as viewed on 12/18/2006.

Includes bibliographical references.

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