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Human Capital and Self-Enforcing Contracts

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  • Azariadis, Costas

Abstract

This essay analyzes labor contracts as a device for rearranging factor incomes over time under conditions of extreme adverse selection; in particular, the lack of verifiable public information about future compensation prevents finitely-lived workers from borrowing against their earnings. Specific human capital is used as an incentive to implement intertemporal self-enforcing contracts between workers and firms. After proposing a necessary and sufficient condition for the existence of such contracts, the resulting equilibrium earnings profiles are explored along with the effects of imperfections in the credit market on the way workers choose jobs and allocate time between current production and training. Copyright 1988 by The editors of the Scandinavian Journal of Economics.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 90 (1988)
Issue (Month): 4 ()
Pages: 507-28

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Handle: RePEc:bla:scandj:v:90:y:1988:i:4:p:507-28

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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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Cited by:
  1. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2010. "Credit within the Firm," EIEF Working Papers Series 1008, Einaudi Institute for Economics and Finance (EIEF), revised Apr 2010.
  2. Lagakos, David & Moll, Benjamin & Porzio, Tommaso & Qian, Nancy, 2012. "Experience Matters: Human Capital and Development Accounting," CEPR Discussion Papers 9253, C.E.P.R. Discussion Papers.

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