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Contract-Theoretic Approaches to Wages and Displacement

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Author Info

  • Wouter J. den Haan

    (Dept. Economics, UCLA, San Diego)

  • Garey Ramey

    (Dept. Economics, UCLA, San Diego)

  • Joel Watson

    (Dept. Economics, UCLA, San Diego)

Abstract

This paper develops a theoretical framework for analyzing contracting imperfections in long-term employment relationships. We focus chiefly on limited enforceability and limited worker liquidity. Inefficient severance of employment relationships, payment of efficiency wages, the relative responses of wages and employment to business cycle shocks, and the propagation of these shocks are linked to the nature of contracting imperfections.

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File URL: http://cowles.econ.yale.edu/P/cd/d12a/d1216.pdf
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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1216.

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Length: 27 pages
Date of creation: Apr 1999
Date of revision:
Publication status: Published in Review, Federal Reserve Bank of St. Louis, (May/June 1999), 81: 55-68
Handle: RePEc:cwl:cwldpp:1216

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References

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  1. Robert E. Hall & Edward P. Lazear, 1982. "The Excess Sensitivity of Layoffs and Quits to Demand," NBER Working Papers 0864, National Bureau of Economic Research, Inc.
  2. MacLeod, W Bentley & Malcomson, James M & Gomme, Paul, 1994. "Labor Turnover and the Natural Rate of Unemployment: Efficiency Wage versus Frictional Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 276-315, April.
  3. Masanori Hashimoto & Ben T. Yu, 1980. "Specific Capital, Employmemt Contracts, and Wage Rigidity," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 536-549, Autumn.
  4. repec:cdl:ucsdec:550851 is not listed on IDEAS
  5. Danthine, Jean-Pierre & Donaldson, John B., 1990. "Efficiency wages and the business cycle puzzle," European Economic Review, Elsevier, vol. 34(7), pages 1275-1301, November.
  6. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  7. Boldrin, Michael & Horvath, Michael, 1995. "Labor Contracts and Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 972-1004, October.
  8. Carmichael, Lorne, 1985. "Can Unemployment Be Involuntary? Comment [Equilibrium Unemployment as a Worker Discipline Device]," American Economic Review, American Economic Association, vol. 75(5), pages 1213-14, December.
  9. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  10. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
  11. Ramey Garey & Watson Joel, 2001. "Bilateral Trade and Opportunism in a Matching Market," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-35, November.
  12. MacLeod, W.B. & Malcomson, J.M., 1997. "Motivation and markets," Discussion Paper Series In Economics And Econometrics 9720, Economics Division, School of Social Sciences, University of Southampton.
  13. Macleod, W.B. & Malcomson, J., 1989. "Wage Premiums And Profit Maximisation In Efficiency Wage Models," Papers 337, London School of Economics - Centre for Labour Economics.
  14. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
  15. Garey Ramey & Joel Watson, 1999. "Contractual Intermediaries," Cowles Foundation Discussion Papers 1235, Cowles Foundation for Research in Economics, Yale University.
  16. Strand, J., 1988. "Business Cycles With Worker Moral Hazard," Memorandum 19/1988, Oslo University, Department of Economics.
  17. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  18. W. Bentley MacLeod & James M. Malcomson, 1986. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Working Papers 585, Queen's University, Department of Economics.
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Citations

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Cited by:
  1. Carstensen, Vivian, 2000. "Employment Stability via Annualized Hours Contracts," Hannover Economic Papers (HEP) dp-230, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Garey Ramey & Joel Watson, 1999. "Contractual Intermediaries," Cowles Foundation Discussion Papers 1235, Cowles Foundation for Research in Economics, Yale University.
  3. Beyer, Andreas & Farmer, Roger E. A., 2002. "Natural rate doubts," Working Paper Series 0121, European Central Bank.
  4. den Haan, Wouter J. & Ramey, Garey & Watson, Joel, 1999. "Job Destruction and the Experiences of Displaced Workers," University of California at San Diego, Economics Working Paper Series qt1rd0w96t, Department of Economics, UC San Diego.
  5. Costain, James & Jansen, Marcel, 2009. "Employment Fluctuations with Downward Wage Rigidity: The Role of Moral Hazard," IZA Discussion Papers 4344, Institute for the Study of Labor (IZA).
  6. James Costain & Marcel Jansen, 2006. "Employment Fluctuations with Downward Wage Rigidity," Computing in Economics and Finance 2006 204, Society for Computational Economics.
  7. James E. Rauch & Joel Watson, 1999. "Starting Small in an Unfamiliar Environment," Cowles Foundation Discussion Papers 1218, Cowles Foundation for Research in Economics, Yale University.
  8. Carstensen, Vivian, 1999. "Beschäftigungssicherung durch Arbeitszeitflexibilisierung," Hannover Economic Papers (HEP) dp-228, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  9. Patrick Francois & Huw Lloyd-Ellis, 2005. "Schumpeterian Restructuring," Working Papers 1039, Queen's University, Department of Economics.

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