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Enforcement of Implicit Employment Contracts through Unionization

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Author Info
Hogan, Chad
Abstract

In a world in which employment contracts are incomplete, it is costly for a firm to establish credibility for honoring implicit terms of employment agreements. By monitoring the employment relationships between the firm and its workers, the labor union may provide the workforce with valuable information regarding the firm's adherence to these implicit agreements. Thus, the union provides a signaling mechanism that allows workers to coordinate their actions in order to discipline the firm for a breach of the implicit contract. This mechanism enhances the firm's credibility when forming employment contracts and facilitates increased employment levels. Copyright 2001 by University of Chicago Press.

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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 19 (2001)
Issue (Month): 1 (January)
Pages: 171-95
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Handle: RePEc:ucp:jlabec:v:19:y:2001:i:1:p:171-95

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  1. Devereux, Paul J. & Hart, Robert A., 2005. "The Spot Market Matters: Evidence on Implicit Contracts from Britain," IZA Discussion Papers 1497, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Scoppa, Vincenzo, 2003. "Contratti Incompleti Ed Enforcement Endogeno. Una Rassegna Della Letteratura
    [Incomplete Contracts and Endogenous Enforcement. A Survey]    ," MPRA Paper 17284, University Library of Munich, Germany. [Downloadable!]
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