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Did American Welfare Capitalists Breach their Implicit Contracts? Preliminary Findings from Company-level Data, 1920-1940

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  • Chiaki Moriguchi

Abstract

It has been claimed that American employers' experiments in private welfare capitalism collapsed during the Great Depression and were subsequently replaced by the welfare state and industrial unionism. However, recent studies reveal considerable differences among firms, adding complex nuances to a simple story of discontinuation. Characterizing private welfare capitalism as a set of personnel practices that constituted an implicit contract equilibrium, this paper compiles data of fourteen manufacturing firms and tests the implications of implicit contract theory. It finds that the repudiation of implicit contracts was positively correlated with the severity of the depression experienced by a firm and negatively correlated with the effectiveness of internal enforcement mechanisms. It also shows that a firm with more repudiation experienced greater change in labor-management relations under the New Deal regime. A comparative case study complements the findings by providing quantitative evidence.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9868.

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Date of creation: Jul 2003
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Publication status: published as Moriguchi, Chiaki. "Implicit Contracts, The Great Depression, And Institutional Change: A Comparative Analysis Of U.S. And Japanese Employment Relations, 1920-1940," Journal of Economic History, 2003, v63(3,Sep), 625-665.
Handle: RePEc:nbr:nberwo:9868

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  7. Kanemoto, Yoshitsugu & Bentley MacLeod, W., 1989. "Optimal labor contracts with non-contractible human capital," Journal of the Japanese and International Economies, Elsevier, vol. 3(4), pages 385-402, December.
  8. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, American Economic Association, vol. 87(3), pages 291-313, June.
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