A dynamic contracting model for wages and employment in three European economies
AbstractWe present a dynamic non-linear model for an efficient contracting between a firm facing adjustment costs on labour and a union having preferences which are subject to habit formation. The modelâs first order necessary conditions are estimated for the French, the Dutch and the Belgian labour market. The estimation results turned out to be remarkably similar for the three countries. Two alternative hypotheses are also investigated : (i) a myopic behaviour of the union and (ii) a competitive labour market. The performance of the efficient contract model with a forward-looking union is found to be superior to that of the neo-classical model in explaining the dynamics of employment and wages in the three countries.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 40 (1996)
Issue (Month): 2 (February)
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Web page: http://www.elsevier.com/locate/eer
Other versions of this item:
- de la Croix, David & Palm, Franz & Pfann, Gerard, 1993. "A Dynamic Contracting Model for Wages and Employment in three European Economies," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1993021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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