Firm reputation and self-enforcing labor contracts

Yoshitsugu Kanemoto, W. Bentley MacLeod

Research output: Contribution to journalArticlepeer-review

12 Scopus citations


This paper studies the relationship between incentive contracts and firm reputation. One of the important elements of the Japanese production system is its ability to foster cooperative behavior among its employees. This behavior is sustained by the explicit rewards that the firm provides to encourage such behavior, including promotion up a salary hierarchy and yearly bonus payments that may form up to 40% of a worker's yearly income. Incentive schemes of this sort create a possibility of cheating on the side of the firm. We show how the institutional structure of the Japanese labor relation solves this moral hazard problem using a model that combines an incentive contract and firm reputation.

Original languageEnglish (US)
Pages (from-to)144-162
Number of pages19
JournalJournal of The Japanese and International Economies
Issue number2
StatePublished - Jun 1992
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations


Dive into the research topics of 'Firm reputation and self-enforcing labor contracts'. Together they form a unique fingerprint.

Cite this