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Contract Duration and Indexation in a Period of Real and Nominal Uncertainty

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Author Info
Louis Christofides ()
Chen Peng

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Abstract

A sample of 11885 wage agreements, reached in the Canadian unionized sector during 1976-2000, a period of high as well as exceptionally low inflation and substantial fluctuations in nominal and real uncertainty, is used to study the determinants of key provisions of contracts such as their duration and indexation clauses. Econometric techniques, which account for the interaction between duration and indexation, as well as the latent nature of the elasticity of indexation are used. Results obtained suggest that expected inflation, nominal and real uncertainty account for most of the secular and cyclical changes in contract provisions.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 994.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_994

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Related research
Keywords: contract duration; indexation; nominal; real uncertainty;

Other versions of this item:

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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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. Barcena-Ruiz, Juan Carlos & Campo, Maria Luz, 2000. "Short-term or long-term labor contracts," Labour Economics, Elsevier, vol. 7(3), pages 249-260, May. [Downloadable!] (restricted)
  2. Kanago, Bryce, 1998. "The Relation between Contract Duration and Inflation Uncertainty: Further Evidence," Journal of Macroeconomics, Elsevier, vol. 20(4), pages 811-819, October. [Downloadable!] (restricted)
  3. Ehrenberg, Ronald G & Danziger, Leif & San, Gee, 1983. "Cost-of-Living Adjustment Clauses in Union Contracts: A Summary of Results," Journal of Labor Economics, University of Chicago Press, vol. 1(3), pages 215-45, July. [Downloadable!] (restricted)
  4. David Card, 1983. "Cost-of-living escalators in major union contracts," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 37(1), pages 34-48, October.
  5. Kevin J. Murphy, 1992. "Determinants of contract duration in collective bargaining agreements," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 45(2), pages 352-365, January.
  6. Robert Rich & Joseph Tracy, 2000. "Uncertainty and Labor Contract Durations," NBER Working Papers 7731, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April. [Downloadable!] (restricted)
  8. Dye, Ronald A, 1985. "Optimal Length of Labor Contracts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 251-70, February. [Downloadable!] (restricted)
  9. Gray, Jo Anna, 1978. "On Indexation and Contract Length," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 1-18, February. [Downloadable!] (restricted)
  10. Wallace, Frederick H, 2001. "The Effects of Shock Size and Type on Labor-Contract Duration," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 658-81, July. [Downloadable!] (restricted)
  11. Danziger, Leif, 1988. "Real Shocks, Efficient Risk Sharing, and the Duration of Labor Contracts," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 435-40, May. [Downloadable!] (restricted)
  12. Rich, R W & Raymond, J E & Butler, J S, 1992. "The Relationship between Forecast Dispersion and Forecast Uncertainty: Evidence from a Survey Data-ARCH Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(2), pages 131-48, April-Jun. [Downloadable!] (restricted)
  13. Mark Bils, 1989. "Indexation and contract length in unionized U.S. manufacturing," Proceedings, Federal Reserve Bank of Cleveland, pages 145-176.
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  14. Wallace, Frederick H. & Blanco, Herminio, 1991. "The effects of real and nominal shocks on union-firm contract duration," Journal of Monetary Economics, Elsevier, vol. 27(3), pages 361-380, June. [Downloadable!] (restricted)
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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. Fregert, Klas & Jonung, Lars, 2008. "Inflation Targeting Is a Success, So Far: 100 Years of Evidence from Swedish Wage Contracts," Economics Discussion Papers 2008-24, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
  4. 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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