Universität zu Köln

Mueller, Daniel and Schmitz, Patrick W. ORCID: 0000-0003-3461-5102 (2021). The right to quit work: An efficiency rationale for restricting the freedom of contract. J. Econ. Behav. Organ., 184. S. 653 - 670. AMSTERDAM: ELSEVIER. ISSN 1879-1751

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Abstract

The Thirteenth Amendment to the United States Constitution prohibits involuntary servitude, except as a punishment for crime. But what if an agent voluntarily signs a contract to provide a service for a principal? Should such contracts always be enforceable? Or should the freedom of contract be restricted, such that the agent cannot waive his or her right to quit work? According to the Coase Theorem, restricting the freedom of two rational parties to contract with each other cannot A principal hires an agent to provide a verifiable service. Initially, the agent can exert unobservable effort to reduce his disutility from providing the service. If the agent is free to waive his right to quit, he may voluntarily sign a contract specifying an inefficiently large service level, while there are insufficient incentives to exert effort. If the agent's right to quit is inalienable, the underprovision of effort may be further aggravated, but the service level is ex post efficient. Overall, it turns out that the total surplus can be larger when agents are not permitted to contractually waive their right to quit work. Yet, we also study an extension of our model in which even the agent can be strictly better off when the parties have the contractual freedom to waive the agent's right to quit. (c) 2021 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license ( http://creativecommons.org/licenses/by-nc-nd/4.0/ )

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Mueller, Daniel UNSPECIFIED UNSPECIFIED UNSPECIFIED Schmitz, Patrick W. UNSPECIFIED orcid.org/0000-0003-3461-5102 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-578021
DOI:	10.1016/j.jebo.2021.02.004
Journal or Publication Title:	J. Econ. Behav. Organ.
Volume:	184
Page Range:	S. 653 - 670
Date:	2021
Publisher:	ELSEVIER
Place of Publication:	AMSTERDAM
ISSN:	1879-1751
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language LIMITED-LIABILITY; INCOMPLETE CONTRACTS; AGENCY PROBLEMS; MORAL HAZARD; JOB DESIGN; PERFORMANCE; PROTECTION; DAMAGES; LAW; RENEGOTIATION Multiple languages Economics Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/57802