Self-Enforcing Labour Contracts and Macroeconomic Dynamics
AbstractTo properly account for the dynamics of the key macroeconomic variables, researchers incorporate various internal propagation mechanisms in their models. In general, these mechanisms implicitly rely on the assumption of a perfect equality between the real wage and the marginal product of labour. This paper features a micro-founded model of a limited-commitment firm, and derive endogenous dynamic labour contracts that produce a different linkage between the real wage and the marginal product of labour. The risk-sharing between the entrepreneur and the worker, both faced with enforcement problems, provides a different type of propagation mechanism. I investigate the dynamic properties of this endogenous rigidity in relation to the initial bargaining power of each agent. Copyright International Atlantic Economic Society 2007
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Bibliographic InfoArticle provided by Springer in its journal International Advances in Economic Research.
Volume (Year): 13 (2007)
Issue (Month): 2 (May)
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Web page: http://www.springerlink.com/link.asp?id=112112
internal propagation mechanisms; real business cycle; risk-sharing hypothesis; E12; E49; J30; J31; J41;
Find related papers by JEL classification:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E49 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Other
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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