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Involuntary unemployment in dynamic contract equilibria

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  • Macleod, W. Bentley
  • Malcomson, James M.

Abstract

In this paper the set of bilateral wage contracts in a dynamic model with observable effort is characterized. Our first result demonstrates that bond payments and severance pay do not increase the size of the set of incentive compatible contracts. Second, we show that unobservable effort can lead to voluntary unemployment.
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Suggested Citation

  • Macleod, W. Bentley & Malcomson, James M., 1987. "Involuntary unemployment in dynamic contract equilibria ," European Economic Review, Elsevier, vol. 31(1-2), pages 427-435.
    • Handle: RePEc:eee:eecrev:v:31:y:1987:i:1-2:p:427-435
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    Cited by:

    1. Nadide Banu Olcay, 2016. "Dynamic incentive contracts with termination threats," Review of Economic Design, Springer;Society for Economic Design, vol. 20(4), pages 255-288, December.
    2. Robin Boadway & Nicolas Marceau, 1994. "Time inconsistency as a rationale for public unemployment insurance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 1(2), pages 107-126, October.
    3. Pablo González, 2002. "Profit Sharing Reconsidered: Efficiency Wages and Renegotiation Costs," Documentos de Trabajo 151, Centro de Economía Aplicada, Universidad de Chile.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables

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