Title

Wage-hours contracts, overtime working and premium pay

Document Type

Journal article

Source Publication

Labour Economics

Publication Date

1-1-2010

Volume

17

Issue

1

First Page

170

Last Page

179

Keywords

Asymmetric information, Overtime, Premium pay, Specific human capital, Wage-hours contracts

Abstract

This paper offers a contract-based theory to explain the determination of standard hours, overtime hours and overtime premium pay. We expand on the wage contract literature that emphasises the role of firm-specific human capital and that explores problems of contract efficiency in the face of information asymmetries between the firm and the worker. We first explore a simple wage-hours contract without overtime and show that incorporating hours into the contract may itself produce efficiency gains. We then show how the introduction of overtime hours, remunerated at premium rates, can further improve contract efficiency. Our modelling outcomes in respect of the relationship between the overtime premium and the standard wage rate relate closely to earlier developments in hedonic wage theory. Throughout, we emphasise the intuitive reasoning behind the theory and we also supply relevant empirical evidence. Mathematical derivations are provided in an Appendix.

DOI

10.1016/j.labeco.2009.04.002

Print ISSN

09275371

Publisher Statement

Copyright © 2009 Elsevier B.V. All rights reserved. Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Recommended Citation

Hart, R. A., & Ma, Y. (2011). Wage-hours contracts, overtime working and premium pay. Labour Economics, 17(1), 170-179. doi:10.1016/j.labeco.2009.04.002

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