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The Spot Market Matters: Evidence On Implicit Contracts From Britain

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  • Paul J. Devereux
  • Robert A. Hart

Abstract

Based on the methodology of Beaudry and DiNardo (1991), this paper investigates the relative importance of the spot market and implicit contracts in the determination of British real wages. Empirical work is carried out separately for males and females with individual‐level data taken from the New Earnings Survey Panel for the years 1976–2001. In contrast to previous studies that used North American data, the spot market is found to be more important than implicit contracts in determining real wages, although we do find some support for contracting effects. Further evidence is provided through the analysis of individual wage sequences. These suggest that the downwardly rigid wage sequences implied by implicit contracts with costless worker mobility are not prevalent in Britain.

Suggested Citation

  • Paul J. Devereux & Robert A. Hart, 2007. "The Spot Market Matters: Evidence On Implicit Contracts From Britain," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 661-683, November.
    • Handle: RePEc:bla:scotjp:v:54:y:2007:i:5:p:661-683
    DOI: 10.1111/j.1467-9485.2007.00435.x
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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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