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Implicit Contracts, Labour Mobility and Unemployment

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Author Info

  • Richard Arnott
  • Arthur Hosios
  • Joseph Stiglitz

Abstract

Firm's inability to monitor employees search efforts results in a tradeoff between risk-bearing and incentive considerations in the design of employment-related insurance. Since the provision of insurance against firm-specific shocks adversely affects workers' incentives to search out better jobs, only partial insurance will be provided to encourage workers to stay (leave) at high (low) productivity firms: in this setting, quits and layoffs are alternative means of inducing separations at low productivity firms. This paper describes the equilibrium labour contract when search information is private, and is thereby able to provide the first unified treatment of risk-sharing contracts, interfirm mobility, worksharing, layoffs, severance pay, on-the-job and off-the-job search, quits and unemployment.

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Bibliographic Info

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 543.

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Length: 36
Date of creation: 1983
Date of revision:
Handle: RePEc:qed:wpaper:543

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Web page: http://qed.econ.queensu.ca/
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Cited by:
  1. Theofanis Tsoulouhas, . "Labor and Credit Contracts with Asymmetric Information and Bankruptcy," Working Paper Series 20, North Carolina State University, Department of Economics.
  2. Jonathan P. Thomas, 1999. "Fair Pay and a Wagebill Arguement for Wage Rigidity and Excessive Employment Variability," Discussion Paper Series, Department of Economics 199919, Department of Economics, University of St. Andrews.
  3. Burguet, Roberto & Caminal, Ramon, 2008. "Does the market provide sufficient employment protection?," Labour Economics, Elsevier, vol. 15(3), pages 406-422, June.
  4. Sherwin Rosen, 1985. "Implicit Contracts: A Survey," NBER Working Papers 1635, National Bureau of Economic Research, Inc.
  5. Lam, Kit-Chun & Liu, Pak-Wai & Wong, Yue-Chim, 1995. "Wage structure when wage offers are private," Labour Economics, Elsevier, vol. 2(1), pages 19-32, March.
  6. Tomi Kyyrä & Ralf Wilke, 2004. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland," Discussion Papers 346, Government Institute for Economic Research Finland (VATT).
  7. Joseph E. Stiglitz, 2002. "Information and the Change in the Paradigm in Economics," American Economic Review, American Economic Association, vol. 92(3), pages 460-501, June.
  8. Guerrazzi, Marco & Meccheri, Nicola, 2012. "From wage rigidity to labour market institution rigidity: A turning-point in explaining unemployment?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(2), pages 189-197.
  9. Wang, Yanguo & Jaenicke, Edward C., 2005. "Pooling, Separating, and Cream-Skimming In Relative-Performance Contracts," 2005 Annual meeting, July 24-27, Providence, RI 19522, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  10. Tomi Kyyrä & Ralf A. Wilke, 2006. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland Revised," Discussion Papers 396, Government Institute for Economic Research Finland (VATT).
  11. Wang, Yanguo & Jaenicke, Edward C., 2005. "Pooling, Separating, and Cream-Skimming In Relative-Performance Contracts," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24639, European Association of Agricultural Economists.
  12. Tuulia Hakola, 2002. "Economic Incentives and Labour Market Transitions of the Aged Finnish Workforce," Research Reports 89, Government Institute for Economic Research Finland (VATT).
  13. Bengt Holmstrom, 1980. "Equilibrium Long-Term Labor Contracts," Discussion Papers 414R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  14. Engström, Per, 2002. "Optimal Non-Linear Income Taxation in Search Equilibrium," Working Paper Series 2002:18, Uppsala University, Department of Economics.
  15. Jahn, Elke J. & Wagner, Thomas, 2005. "Contractual Employment Protection and the Scarring Risk of Unemployment," IZA Discussion Papers 1813, Institute for the Study of Labor (IZA).

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