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Limited Commitment Models of the Labour Market

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Author Info
Jonathan P Thomas () (Economics, University of Edinburgh)
Tim Worrall () (Economics, Keele University)

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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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Publisher Info
Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2007/11.

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Length: 31 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:kee:kerpuk:2007/11

Note: The authors gratefully acknowledge the financial support of the Economic and Social Research Council (Research Grant:RES-000-23-0865). We also thank Jim Malcomson, Leena Rudanko and Dongyun Shin for helpful comments on an earlier draft and the participants of the workshop on ``The theory and empirics of risk sharing'' at the Toulouse School of Economics, September 2007. The usual caveats apply.
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Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
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Related research
Keywords: Labour contracts; self-enforcing contracts; business cycle; unemployment.;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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References listed on IDEAS
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    Other versions:
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