A Model Of Nominal Contracts
AbstractA model is produced in which labor contracts that prespecify (unindexed) nominal wage payments arise endogenously. These contracts function as a self-selection mechanism. Under appropriately different attitudes toward price-level risk (which can either arise directly from preferences or be induced by different patterns of asset holdings), nominal contracts allow high-productivity workers to signal their type by their willingness to accept unindexed contracts. This explanation of nominal contracts does not require that money be used in any particular set of transactions, and nominal contracts enhance the risk faced by all parties accepting them. Copyright 1989 by University of Chicago Press.
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Bibliographic InfoPaper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 149.
Length: 30 pages
Date of creation: 1988
Date of revision:
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Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.
labour contracts ; information ; prices;
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