Competition And Relational Contracts: The Role Of Unemployment As A Disciplinary Device
When workers are faced with the threat of unemployment, their relationship with a particular firm becomes valuable. As a result, a worker may comply with the terms of a relational contract that demands high effort even when performance is not enforceable by a third party. But can relational contracts motivate high effort when workers can easily find alternative jobs? We examine how competition for labor affects the emergence of relational contracts and their effectiveness in overcoming moral hazard in the labor market. We show that effective relational contracts do emerge in a market with excess demand for labor. Long-term relationships turn out to be less frequent when there is excess demand for labor than they are in a market characterized by exogenous unemployment. However, stronger competition for labor does not impair labor market efficiency: higher wages induced by competition lead to higher effort out of concerns for reciprocity.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 10 (2012)
Issue (Month): 4 (08)
|Contact details of provider:|| Web page: http://www.eeassoc.org/|
More information through EDIRC
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.:
- Urs Fischbacher & Simon Gaechter, 2006.
"Heterogeneous social preferences and the dynamics of free riding in public goods,"
2006-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
- Fischbacher, Urs & Gächter, Simon, 2006. "Heterogeneous Social Preferences and the Dynamics of Free Riding in Public Goods," IZA Discussion Papers 2011, Institute for the Study of Labor (IZA).
- Urs Fischbacher & Simon Gaechter, 2006. "Heterogeneous social preferences and the dynamics of free riding in public goods," Discussion Papers 2006-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
- Urs Fischbacher & Simon Gï¿½chter, 2005. "Heterogeneous social preferences and the dynamics of free riding in public goods," IEW - Working Papers 261, Institute for Empirical Research in Economics - University of Zurich.
- Brown, Martin & Falk, Armin & Fehr, Ernst, 2003.
"Relational Contracts and the Nature of Market Interactions,"
IZA Discussion Papers
897, Institute for the Study of Labor (IZA).
- Martin Brown & Armin Falk & Ernst Fehr, 2004. "Relational Contracts and the Nature of Market Interactions," Econometrica, Econometric Society, vol. 72(3), pages 747-780, 05.
- Peter AUER & Sandrine CAZES, 2000. "The resilience of the long-term employment relationship: Evidence from the industrialized countries," International Labour Review, International Labour Organization, vol. 139(4), pages 379-408, December.
- Wu, Steven Y. & Roe, Brian E., 2007. "Discretionary Latitude and Relational Contracting," IZA Discussion Papers 2879, Institute for the Study of Labor (IZA).
- James L. Medoff & Katharine G. Abraham, 1980.
"Experience, Performance, and Earnings,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 95(4), pages 703-736.
- Flabbi, Luca & Ichino, Andrea, 2001.
"Productivity, seniority and wages: new evidence from personnel data,"
Elsevier, vol. 8(3), pages 359-387, June.
- Ichino, A. & Flabbi, L., 1998. "Productivity, Seniority and Wages. New Evidence form Personnel Data," Economics Working Papers eco98/11, European University Institute.
- Flabbi, Luca & Ichino, Andrea, 1998. "Productivity, Seniority and Wages: New Evidence from Personnel Data," CEPR Discussion Papers 1966, C.E.P.R. Discussion Papers.
- Steffen Huck & Andrew J. Seltzer & Brian Wallace, 2011. "Deferred Compensation in Multiperiod Labor Contracts: An Experimental Test of Lazear's Model," American Economic Review, American Economic Association, vol. 101(2), pages 819-843, April.
- Hoyt Bleakley & Ann E. Ferris & Jeffrey C. Fuhrer, 1999. "New data on worker flows during business cycles," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 49-76.
- Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
- James Andreoni & Marco Castillo & Ragan Petrie, 2003. "What Do Bargainers' Preferences Look Like? Experiments with a Convex Ultimatum Game," American Economic Review, American Economic Association, vol. 93(3), pages 672-685, June.
- Roe, Brian E. & Wu, Steven Y., 2009. "Do the Selfish Mimic Cooperators? Experimental Evidence from Finitely-Repeated Labor Markets," IZA Discussion Papers 4084, Institute for the Study of Labor (IZA).
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
When requesting a correction, please mention this item's handle: RePEc:bla:jeurec:v:10:y:2012:i:4:p:887-907. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.