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Is the Behavior of Hours Worked Consistent with Implicit Contract Theory?

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  • Beaudry, Paul
  • DiNardo, John

Abstract

This paper examines the determinants of hours worked when employment relationships are influenced by risk-sharing considerations. The environment considered is an extension of the standard symmetric-information risk-sharing model that allows for the possibility of enforcement problems on the part of both the employer and the employee. The authors show that this class of risk-sharing models unambiguously predicts hours to be influenced by wages only through an income effect. Using data from the Panel Study of Income Dynamics, they find evidence in favor of this extended version of the risk-sharing model. Copyright 1995, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 110 (1995)
Issue (Month): 3 (August)
Pages: 743-68

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Handle: RePEc:tpr:qjecon:v:110:y:1995:i:3:p:743-68

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Christian Calmès, 2007. "Self-Enforcing Labour Contracts and Macroeconomic Dynamics," International Advances in Economic Research, Springer, vol. 13(2), pages 200-213, May.
  2. Otrok, Christopher & Pourpourides, Panayiotis M., 2008. "On The Cyclicality of Real Wages and Wage Differentials," Cardiff Economics Working Papers E2008/19, Cardiff University, Cardiff Business School, Economics Section, revised Mar 2009.
  3. Bellou, Andriana & Kaymak, Barış, 2012. "Wages, implicit contracts, and the business cycle: Evidence from a European panel," Labour Economics, Elsevier, vol. 19(6), pages 898-907.
  4. Jonathan P. Thomas & Tim Worrall, 2007. "Limited Commitment Models Of The Labour Market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 750-773, November.
  5. Senesky, Sarah, 2005. "Testing the intertemporal labor supply model: are jobs important?," Labour Economics, Elsevier, vol. 12(6), pages 749-772, December.
  6. Beaudry, Paul & Pages, Carmen, 2001. "The cost of business cycles and the stabilization value of unemployment insurance," European Economic Review, Elsevier, vol. 45(8), pages 1545-1572, August.
  7. Christian Calmès, 2003. "Poignée de main invisible et persistance des cycles économiques : une revue de la littérature," Working Papers 03-40, Bank of Canada.
  8. Christian Calmès & Raymond Théoret, 2009. "The Non-Convexity Issues in a Limited-Commitment Economy," RePAd Working Paper Series UQO-DSA-wp012009, Département des sciences administratives, UQO.
  9. Schöb, Ronnie & Wildasin, David, 2003. "Economic Integration and Labor Market Institutions: Worker Mobility, Earnings Risk, and Contract Structure," IZA Discussion Papers 945, Institute for the Study of Labor (IZA).
  10. Martinez-Granado, Maite, 2005. "Testing labour supply and hours constraints," Labour Economics, Elsevier, vol. 12(3), pages 321-343, June.
  11. Massimiliano De Santis, 2007. "Individual Consumption Risk and the Welfare Cost of Business Cycles," American Economic Review, American Economic Association, vol. 97(4), pages 1488-1506, September.
  12. Robert A. Hart & Yue Ma, 2008. "Wages, Hours and Human Capital Over the Life Cycle," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 228(5+6), pages 446-464, December.
  13. Christian Sigouin, 2000. "Self-enforcing Employment Contracts and Business Cycle Fluctuations," Cahiers de recherche CREFE / CREFE Working Papers 127, CREFE, Université du Québec à Montréal.
  14. Johannes F. Schmieder & Till von Wachter, 2010. "Does Wage Persistence Matter for Employment Fluctuations? Evidence from Displaced Workers," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 1-21, July.
  15. Sigouin, Christian, 2004. "Self-enforcing employment contracts and business cycle fluctuations," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 339-373, March.

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