Abstract
AbstractThis paper identifies two channels through which contracts induce performance and contain quid pro quo harassment: a disincentive effect raises the cost for harassers and a selection effect that attracts whistleblower types raises potential victims' resistance. An effective employer liability generates a negative relationship between wages and harassment risk. If liability is ineffective, however, employers can opt for low‐wage contracts that induce high harassment and minimum internal complaints. In such environments, wages compensate exogenous harassment risks. Thus the wage‐harassment risk equation can signal effectiveness of employer liability.
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