Rhineland exit?

Abstract

We argue in favor of the shareholder model of the firm because assigning the full surplus of the firm to shareholders provides the best possible social insurance by diversifying firm-specific risks on capital markets. Coordination in wage bargaining and collective norms on what is proper compensation play an important role in reducing the claim of workers on the firm's surplus. In Denmark, workers bear less firm-specific risk than workers in the United States do. Collective action thus has an important role to play. Politicians, however, face the temptation to please voters and incumbent workers with short-run gains at the expense of exposing workers to firm-specific risks and reducing future job creation.

Are older workers overpaid? A literature review

“…In addition, contracts that specify a stable wage profile shift risk from the employee to the employer. That is efficient if employers are less risk averse than employees or are better able to shift some of these risks to the capital market (Bovenberg and Teulings 2008).…”

How to Share Our Risks Efficiently? Principles for Optimal Social Insurance and Pension Provision

“…The question is what β and δ should be, see Buhai et al (2008) and Bovenberg and Teulings (2008). A specific investment in the relation between a worker and her employer leads to a surplus of the continuation of the match relative to what the worker and the firm could get on the outside market after breaking up their relation.…”

Returns to Tenure or Seniority?

“…In this model, firing is efficient, but hiring is less than first best due to a hold up problem. Bovenberg and Teulings (2009) elaborate the implications of this model for the insurance of the workers' lifetime labor income.…”