This chapter reviews recent developments in the study of individual employment contracts. It discusses three reasons for an employer and an employee to have a contract: (1) to allocate risk in a way different from a spot market; (2) to enhance the efficiency of investment decisions by protecting the return on investments made by one party from being captured by the other; and (3) to motivate the employee by making compensation depend on performance. The main emphasis is on issues that arise from the problems of enforcing contracts in practice and from renegotiation by mutual agreement.
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ReDIF This chapter was published in: O. Ashenfelter & D. Card (ed.) Handbook of Labor Economics, , chapter 35, pages 2291-2372, 1999.
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This chapter was published in the following book, which is listed on IDEAS: O. Ashenfelter & D. Card (ed.), 1999.
"Handbook of Labor Economics,"
Handbook of Labor Economics,
Elsevier,
edition 1, volume 3, number 3, September.
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