TY  - RPRT
        AU  - Hart, Robert A.
AU  - Ma, Yue
        TI  - Why Do Firms Pay an Overtime Premium?
        PY  - 2000/Jun/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 163
        UR  - https://www.iza.org/index.php/publications/dp163
        AB  - This paper develops a two-period specific human capital model in which the bargaining
parties seek to achieve optimal wage-hours contracts in the face of asymmetrically held
information. With a single wage rate, we show that the problem of inefficient separations is so
severe that, effectively, no specific training would take place. A wage premium on weekly
overtime hours serves to reduce the effects of asymmetric information although it does not
completely eliminate inefficiency. For those weekly hours for which a premium is paid, worker
compensation exceeds the value of marginal product. There is an optimal automatic
compensatory differential rule represented by an inverse relationship between the contractual
wage and the overtime premium. Implications of imposing mandatory rules for premium pay
and hours of work, as practiced in the United States, are assessed. The model is found to
offer insights into important earlier finding in the literature.
        KW  - asymmetric information
KW  - specific human capital
KW  - overtime premium
KW  - mandatory overtime rules
        ER  -