This paper presents a simple framework for understanding the prevalence of basic piecewise linear wages in the real world. It extends the analysis of individual piecewise linear wages to environments in which the participation constraint is reinforced by intrinsic motivations. It identifies a class of “acceptable” piecewise linear wages verifying both this reinforced participation constraint and the adverse selection constraint. Among them, it restricts the characterization to a class of real-world wages. Through the advantages and drawbacks of certain acceptable piecewise linear wages, it helps explaining why they are common in the real world even if they are not optimal.
KeywordsReal Individual WagesPiecewise Linear WagesIntrinsic Motivation
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