Extension of labor contracts and optimal backpay
AbstractThis paper explains why a union and a firm might settle on a contract duration that may later be extended and characterizes the optimal backpay for the holdout period. It is shown that the choice between concluding a shorter contract that may be extended and immediately concluding a longer contract depends on the prevalence of the different types of uncertainty in the economy. It is also shown that the optimal backpay reduces the negative impact of nominal uncertainty on a workerâs real income, but increases the workerâs exposure to idiosyncratic uncertainty.
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Bibliographic InfoArticle provided by Elsevier in its journal Labour Economics.
Volume (Year): 15 (2008)
Issue (Month): 1 (February)
Contact details of provider:
Web page: http://www.elsevier.com/locate/labeco
Other versions of this item:
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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