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Limited Commitment Models of the Labour Market

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  • Jonathan Thomas

    ()

  • TIm Worrall

Abstract

We present an overview of models of long-term self-enforcing labour contracts in which risk sharing is the dominant motive for contractual solutions. A base model is developed which is sufficiently general to encompass the two-agent problem central to most of the literature, including variable hours. We consider two-sided limited commitment and look at its implications for aggregate labour market variables. We consider the implications for empirical testing and the available empirical evidence. We also consider the one-sided limited commitment problem for which there exists a considerable amount of empirical support.

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Bibliographic Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 176.

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Length: 32
Date of creation: 26 Nov 2007
Date of revision:
Handle: RePEc:edn:esedps:176

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Keywords: Labour contracts; self-enforcing contracts; unemployment; business cycle.;

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  9. Dirk Krueger & Harald Uhlig, 2005. "Competitive Risk Sharing Contracts with One-Sided Commitment," SFB 649 Discussion Papers SFB649DP2005-003, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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Citations

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Cited by:
  1. Pratap, Sangeeta & Quintin, Erwan, 2011. "Financial crises and labor market turbulence," Journal of Monetary Economics, Elsevier, vol. 58(6), pages 601-615.
  2. Leena Rudanko, 2005. "Labor Market Dynamics under Long Term Wage Contracting," 2005 Meeting Papers 876, Society for Economic Dynamics.
  3. Martins, Pedro S. & Solon, Gary & Thomas, Jonathan P., 2010. "Measuring What Employers Really Do about Entry Wages over the Business Cycle," IZA Discussion Papers 4757, Institute for the Study of Labor (IZA).
  4. Oikonomou, Rigas, 2013. "Optimal Unemployment Insurance with Private Insurance," MPRA Paper 55726, University Library of Munich, Germany.

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