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Application of the Contract Theory to the Analysis of the Institute of Certification of Worker’s Competence and Qualification

Author: Aleksandr Yu. Kokovikhin, Cand. Sc. (Econ.), Associate Prof., Head of Labour Economics & Human Resources Dept; Tatyana A. Kansafarova, Cand. Sc., Executive Vice-President; Ivan A. Borisov, Sr. lecturer of Labour Economics & Personnel Management Dept.

Abstract: The paper investigates the problem of constructing a national system for certification of employee competencies and qualifications within the framework of the contract theory. The contractual environment of the Russian labour market is described; existence of a potential positive effect of introduction of the certification system is formally proved. A comparative analysis of different strategies for implementing a certification system is provided. Having analyzed the practice of introducing certification systems in the Sverdlovsk oblast the authors prove that transaction costs and specifics of employment contracts significantly limit the incentives for employers to create a unified system of certification. The recommendations on the optimal model of the certification system are given.

Keywords: adverse selection; screening; incentive-compatible employment contracts; certification of employee qualification.