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Limited Commitment Models Of The Labour Market

  • Jonathan P. Thomas
  • Tim Worrall

We present an overview of models of long-term self-enforcing labour contracts in which risk sharing is the dominant motive for contractual solutions. A base model is developed which is sufficiently general to encompass the two-agent problem central to most of the literature, including variable hours. We consider two-sided limited commitment and look at its implications for aggregate labour market variables. We consider the implications for empirical testing and the available empirical evidence. We also consider the one-sided limited commitment problem for which there exists a considerable amount of empirical support.

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Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 54 (2007)
Issue (Month): 5 (November)
Pages: 750-773

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Handle: RePEc:bla:scotjp:v:54:y:2007:i:5:p:750-773
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