James R. Thompson

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Capital Structure, Pay Structure and Job Termination

Staff Working Paper 2016-12 Jason Allen, James R. Thompson
We develop a model to analyze the link between financial leverage, worker pay structure and the risk of job termination. Contrary to the conventional view, we show that even in the absence of any agency problem among workers, variable pay can be optimal despite workers being risk averse and firms risk neutral.
Content Type(s): Staff Research, Staff Working Papers Topic(s): Financial Institutions, Labour markets JEL Code(s): G, G2, G24, J, J3, J33

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