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Contract-Theoretic Approaches to Wages and Displacement

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  • Wouter J. den Haan
  • Garey Ramey
  • Joel Watson

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 response 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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6972.

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Date of creation: Feb 1999
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Publication status: published as Wouter J. den Haan & Garey Ramey & Joel Watson, 1999. "Contract-theoretic approaches to wages and displacement," Review, Federal Reserve Bank of St. Louis, issue May, pages 55-68.
Handle: RePEc:nbr:nberwo:6972

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  1. Macleod, W.B. & Malcomson, J., 1989. "Wage Premiums And Profit Maximisation In Efficiency Wage Models," Papers, London School of Economics - Centre for Labour Economics 337, London School of Economics - Centre for Labour Economics.
  2. Michele Boldrin & Michael Horvath, 1994. "Labor Contracts and Business Cycles," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1068, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Hall, Robert E & Lazear, Edward P, 1984. "The Excess Sensitivity of Layoffs and Quits to Demand," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 2(2), pages 233-57, April.
  4. repec:cdl:ucsdec:550851 is not listed on IDEAS
  5. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262540932, December.
  6. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers, Centre for Economic Performance, LSE dp0110, Centre for Economic Performance, LSE.
  7. Masanori Hashimoto & Ben T. Yu, 1980. "Specific Capital, Employmemt Contracts, and Wage Rigidity," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 11(2), pages 536-549, Autumn.
  8. Danthine, Jean-Pierre & Donaldson, John B., 1990. "Efficiency wages and the business cycle puzzle," European Economic Review, Elsevier, Elsevier, vol. 34(7), pages 1275-1301, November.
  9. Carmichael, Lorne, 1985. "Can Unemployment Be Involuntary? Comment [Equilibrium Unemployment as a Worker Discipline Device]," American Economic Review, American Economic Association, American Economic Association, vol. 75(5), pages 1213-14, December.
  10. Garey Ramey & Joel Watson, 2002. "Contractual Intermediaries," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 18(2), pages 362-384, October.
  11. W. Bentley MacLeod & James M. Malcomson, 1986. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Working Papers, Queen's University, Department of Economics 585, Queen's University, Department of Economics.
  12. Strand, Jon, 1992. "Business cycles with worker moral hazard," European Economic Review, Elsevier, Elsevier, vol. 36(6), pages 1291-1303, August.
  13. W. Bentley MacLeod & James Malcomson, 1997. "Motivation and Markets," Boston College Working Papers in Economics, Boston College Department of Economics 339., Boston College Department of Economics.
  14. Wouter J. den Haan & Garey Ramey & Joel Watson, 1997. "Job Destruction and Propagation of Shocks," NBER Working Papers 6275, National Bureau of Economic Research, Inc.
  15. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 676-90, September.
  16. Ramey Garey & Watson Joel, 2001. "Bilateral Trade and Opportunism in a Matching Market," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 1(1), pages 1-35, November.
  17. 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, University of Chicago Press, vol. 12(2), pages 276-315, April.
  18. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, American Economic Association, vol. 74(3), pages 433-44, June.
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Citations

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Cited by:
  1. Rauch, James E. & Watson, Joel, 2003. "Starting small in an unfamiliar environment," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 21(7), pages 1021-1042, September.
  2. den Haan, Wouter J. & Ramey, Garey & Watson, Joel, 2000. "Job destruction and the experiences of displaced workers," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 52(1), pages 87-128, June.
  3. Carstensen, Vivian, 2000. "Employment Stability via Annualized Hours Contracts," Hannover Economic Papers (HEP), Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät dp-230, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  4. James Costain & Marcel Jansen, 2006. "Employment Fluctuations with Downward Wage Rigidity," Computing in Economics and Finance 2006, Society for Computational Economics 204, Society for Computational Economics.
  5. James Costain & Marcel Jansen, 2006. "Employment fluctuations with downward wage rigidity: the role of moral hazard," Banco de Espa�a Working Papers 0632, Banco de Espa�a.
  6. Patrick Francois & Huw Lloyd-Ellis, 2005. "Schumpeterian Restructuring," Working Papers, Queen's University, Department of Economics 1039, Queen's University, Department of Economics.
  7. Garey Ramey & Joel Watson, 2002. "Contractual Intermediaries," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 18(2), pages 362-384, October.
  8. Carstensen, Vivian, 1999. "Beschäftigungssicherung durch Arbeitszeitflexibilisierung," Hannover Economic Papers (HEP), Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät dp-228, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  9. Beyer, Andreas & Farmer, Roger E.A., 2007. "Natural rate doubts," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 31(3), pages 797-825, March.

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