The Analysis Of Principal-agent Problem Between Firms And Rural Migrant Workers

The rural migrant labor is regarded as a special group in China and therelated problems have raised wildly concern as with the lots of rural surpluslabor transferring to cities and towns since the reform and opening up. Theemployment problem of the rural migrant workers is closely related to the stabilityof the labor market. Their special characteristics, especially the high mobilitywill afect the regular operation of the enterprises. Thus, the analysis of theprincipal-agent problem between the enterprises and rural migrant workers can,to some extant, ensure the rationality of the contract so as to reduce the frequencyof changing jobs and to ensure the stability of the labor market.Based on the assumptions of the complete and incomplete information in theinformation economy, a principle-agent problem between the enterprises and therural migrant workers is considered and analysed in terms of the principal-agenttheory, in which the rural migrant labors’ earnings at home referring to their pri-vate information is characterized as a random variable. Thus, the principal-agentmodel is established under two circumstances, namely the complete informationand the incomplete information, respectively. By analyzing the incentive com-patibility constraint along with the participation constraint, the proposed modelis converted to get the optimal and the sub-optimal contracts. Furthermore,as the firms can’t observe the private information of the rural migrant labor,which referring to their earnings at home, thus, it is reasonable to characterizethe subjective assessment of the earnings as a fuzzy variable. Then, a fuzzyprincipal-agent model is established along with the incentive compatibility con-straint and the participation constraint, the proposed model is converted into anoptimal control problem and the necessary conditions of the optimal solution areobtained by the Pontryagin maximum principle.Under the random environment, the analysis of the two contracts showsthat, the optimal and the sub-optimal efort level are the same in the case thatthe rural migrant workers’ income at home are less, while, for those owning a relatively higher income at home, their sub-optimum efort level is lower thanthe optimal one. Apart, in the case of incomplete information, the rural migrantworkers who own less at home have higher expectations for wage, as a result,they tend to pay much more efort at work. While, the optimal solution of thefuzzy principal-agent model demonstrates that whether the rural migrant workerwilling to pay efort is closely related to their earnings at home. That is, they maybe more sluggish if their earnings are promising. Vise versa, the rural migrantworker will pay much efort for a higher wage to improve their own utility.To testify the efectiveness, some numerical examples are presented respec-tively.