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Uncertainty and Labor Contract Durations

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Robert Rich
Joseph Tracy

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Abstract

This paper provides an empirical investigation into the relationship between ex ante U.S. labor contract durations and uncertainty over the period 1970 to 1995. We construct measures of inflation uncertainty as well as aggregate nominal and real uncertainty. The results not only corroborate previous findings of an inverse relationship between contract duration and inflation uncertainty, but document that this relationship extends to both measures of aggregate uncertainty. We also explore the robustness of this relationship to the various measures of inflation uncertainty that have appeared in the literature.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7731.

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Date of creation: Jun 2000
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Handle: RePEc:nbr:nberwo:7731

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Find related papers by JEL classification:
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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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. Christofides, Louis N, 1985. "The Impact of Controls on Wage Contract Duration," Economic Journal, Royal Economic Society, vol. 95(377), pages 161-68, March. [Downloadable!] (restricted)
  2. 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.
  3. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February. [Downloadable!] (restricted)
  4. Gali, Jordi, 1992. "How Well Does the IS-LM Model Fit Postwar U.S. Data," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 709-38, May. [Downloadable!] (restricted)
  5. Card, David, 1986. "An Empirical Model of Wage Indexation Provisions in Union Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S144-75, June. [Downloadable!] (restricted)
    Other versions:
  6. Cukierman, Alex & Wachtel, Paul, 1979. "Differential Inflationary Expectations and the Variability of the Rate of Inflation: Theory and Evidence," American Economic Review, American Economic Association, vol. 69(4), pages 595-609, September. [Downloadable!] (restricted)
  7. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September. [Downloadable!] (restricted)
    Other versions:
  8. Canzoneri, Matthew B., 1980. "Labor contracts and monetary policy," Journal of Monetary Economics, Elsevier, vol. 6(2), pages 241-255, April. [Downloadable!] (restricted)
  9. 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)
  10. 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)
  11. Pagan, A R & Hall, A D & Trivedi, P K, 1983. "Assessing the Variability of Inflation," Review of Economic Studies, Blackwell Publishing, vol. 50(4), pages 585-96, October. [Downloadable!] (restricted)
  12. Ronald G. Ehrenberg & Leif Danziger & Gee San, 1984. "Cost-of-Living Adjustment Clauses in Union Contracts," NBER Working Papers 0998, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Vroman, Susan B, 1989. "Inflation Uncertainty and Contract Duration," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 677-81, November. [Downloadable!] (restricted)
  14. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April. [Downloadable!] (restricted)
  15. Wallace Hendricks & Larry M. Kahn, 1983. "Cost-of-living clauses in union contracts: Determinants and effects," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 36(3), pages 447-460, April.
  16. Mullineaux, Donald J, 1980. "Unemployment, Industrial Production, and Inflation Uncertainty in the United States," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 163-69, May. [Downloadable!] (restricted)
  17. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-59, July. [Downloadable!] (restricted)
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  18. Peter Cramton & Morley Gunderson & Joseph Tracy, 1999. "The Effect Of Collective Bargaining Legislation On Strikes And Wages," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 475-487, August. [Downloadable!] (restricted)
    Other versions:
  19. Levi, Maurice D & Makin, John H, 1980. "Inflation Uncertainty and the Phillips Curve: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 70(5), pages 1022-27, December. [Downloadable!] (restricted)
  20. 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)
  21. Benjamin M. Friedman & Kenneth N. Kuttner, 1996. "A Price Target for U.S. Monetary Policy? Lessons from the Experience with Money Growth Targets," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1996-1), pages 77-146. [Downloadable!]
    Other versions:
  22. Cousineau, Jean-Michel & Lacroix, Robert & Bilodeau, Danielle, 1983. "The Determination of Escalator Clauses in Collective Agreements," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 196-202, May. [Downloadable!] (restricted)
  23. Schnell, John F & Gramm, Cynthia L, 1987. "Learning by Striking: Estimates of the Teetotaler Effect," Journal of Labor Economics, University of Chicago Press, vol. 5(2), pages 221-41, April. [Downloadable!] (restricted)
Full references

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. Jonathan Yoder & Ishrat Hossain & Francis Epplin & Damona Doye, 2005. "Contract Duration and the Division of Labor in Agricultural Land Leases," Working Papers 2005-5, School of Economic Sciences, Washington State University. [Downloadable!]
    Other versions:
  3. Jonung, Lars & Fregert, Klas, 2008. "Inflation Targeting Is a Success, So Far: 100 Years of Evidence from Swedish Wage Contracts," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(31), pages 1-25. [Downloadable!]
    Other versions:
  4. Louis Christofides & Chen Peng, 2003. "Contract Duration and Indexation in a Period of Real and Nominal Uncertainty," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  5. C. Benassi & A. E. Scorcu, 2002. "Imperfect Information," Working Papers 450, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  6. Jan Marc Berk & Job Swank, 2002. "Regional Price Adjustment in a Monetary Union," Tinbergen Institute Discussion Papers 02-077/2, Tinbergen Institute. [Downloadable!]
  7. Danziger, Leif & Neuman, Shoshana, 2003. "Delays in Renewal of Labor Contracts: Theory and Evidence," IZA Discussion Papers 709, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  8. Joseph Engelberg & Charles F. Manski & Jared Williams, 2006. "Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters," NBER Working Papers 11978, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. John V. Duca & Carl M. Campbell, III, 2007. "The impact of evolving labor practices and demographics on U.S. inflation and unemployment," Working Papers 0702, Federal Reserve Bank of Dallas. [Downloadable!]
  10. Berk, J.M & Swank, J., 2002. "Regional price adjustment in a monetary union: the case of EMU," Serie Research Memoranda 0016, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics. [Downloadable!]
    Other versions:
  11. Comin, D., 2000. "An Uncertainty-Driven Theory of the Productivity Slowdown: Manufacturing," Working Papers 00-16, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  12. Louis N. Christofides & Amy Peng, 2007. "Real Wage Chronologies," Working Papers 0707, University of Guelph, Department of Economics. [Downloadable!]
    Other versions:
  13. Matthias Paustian, 2005. "The role of contracting schemes for the welfare costs of nominal rigidities," Computing in Economics and Finance 2005 196, Society for Computational Economics. [Downloadable!]
  14. Leif Danziger, 2006. "Extension of Labor Contracts and Optimal Backpay," IZA Discussion Papers 2366, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  15. Gerald Stuber, 2001. "Implications of Uncertainty about Long-Run Inflation and the Price Level," Working Papers 01-16, Bank of Canada. [Downloadable!]
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