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Delays in Renewal of Labor Contracts: Theory and Evidence

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Author Info
Leif Danziger (Ben-Gurion University, Central European University, and Institute for the Study of Labor)
Shoshana Neuman (Bar-Ilan University, Centre for Economic Policy Research, and Institute for the Study of Labor)

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Abstract

In many countries, an expired labor contract is automatically extended during the often-protracted delay before the new contract is signed. Our theoretical model focuses on macroeconomic factors in explaining the delay. It emphasizes the importance of the realized nominal and real shocks, and of the levels of nominal and real uncertainty. The model is tested using Israeli collective wage agreements where long delays are frequent. The empirical findings strongly support the theoretical model. Thus, nominal uncertainty is found to increase the delay, and real uncertainty to decrease the delay, but less in the public than in the private sector.

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

Volume (Year): 23 (2005)
Issue (Month): 2 (April)
Pages: 341-372
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Handle: RePEc:ucp:jlabec:v:23:y:2005:i:2:p:341-372

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Robert Rich & Joseph Tracy, 2000. "Uncertainty and Labor Contract Durations," NBER Working Papers 7731, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Danziger, Leif, 1992. "On the Prevalence of Labor Contracts with Fixed Duration," American Economic Review, American Economic Association, vol. 82(1), pages 195-206, March. [Downloadable!] (restricted)
  3. Harris, Milton & Holmstrom, Bengt, 1987. "On the Duration of Agreements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 389-406, June. [Downloadable!] (restricted)
  4. Vroman, Susan B, 1989. "Inflation Uncertainty and Contract Duration," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 677-81, November. [Downloadable!] (restricted)
  5. Danziger, Leif, 1995. "Contract Reopeners," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 62-87, January. [Downloadable!] (restricted)
  6. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  7. Cramton, P.C. & Tracy, J.S., 1992. "The Determinants of U.S. Labor Disputes," Papers e-92-21, Stanford - Hoover Institution.
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  8. Holden, Steinar, 1994. "Wage bargaining and nominal rigidities," European Economic Review, Elsevier, vol. 38(5), pages 1021-1039, May. [Downloadable!] (restricted)
  9. Daniel S. Hamermesh, 2000. "The Craft of labormetrics," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 53(3), pages 363-380, April.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Louis Christofides & Amy Chen Peng, 2006. "Major Provisions of Labour Contracts and their Theoretical Coherence," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Christofides, L. & Peng, A., 2007. "Real Wage Chronologies," Working Papers 2007-7, University of Guelph, Department of Economics. [Downloadable!]
    Other versions:
  3. Leif Danziger, 2006. "Extension of Labor Contracts and Optimal Backpay," IZA Discussion Papers 2366, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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