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Nonrevelation in Employment Contracts

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  • Kuhn, Peter

Abstract

The author considers an employment contracting model in which firms have private information that is directly payoff-relevant to workers and workers are always free to quit. In contrast to existing models, firms will sometimes fail to reveal adverse information to workers in equilibrium because of the effect this will have on quits. Risk-averse workers can prefer such 'pooling' contracts to separating ones because inducing truth-telling requires firms to cut wages in states that are 'already' bad for the worker. Applications to firms' incentives to reveal unsafe working conditions and impending layoffs or plant closures are discussed. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Kuhn, Peter, 1994. "Nonrevelation in Employment Contracts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 261-282, May.
  • Handle: RePEc:ier:iecrev:v:35:y:1994:i:2:p:261-82
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    References listed on IDEAS

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    1. D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 249-283.
    2. Feenstra, Robert C & Markusen, James R & Zeile, William, 1992. "Accounting for Growth with New Inputs: Theory and Evidence," American Economic Review, American Economic Association, vol. 82(2), pages 415-421, May.
    3. Feenstra & R.C., 1990. "New Goods and Index Members: U.S. Import Prices," Papers 371, California Davis - Institute of Governmental Affairs.
    4. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
    5. Benhabib, Jess & Jovanovic, Boyan, 1991. "Externalities and Growth Accounting," American Economic Review, American Economic Association, vol. 81(1), pages 82-113, March.
    6. Markusen, James R, 1989. "Trade in Producer Services and in Other Specialized Intermediate Inputs," American Economic Review, American Economic Association, vol. 79(1), pages 85-95, March.
    7. Solow, Robert M, 1988. "Growth Theory and After," American Economic Review, American Economic Association, pages 307-317.
    8. James R. Markusen, 1990. "First Mover Advantages, Blockaded Entry, And the Economics of Uneven Development," NBER Working Papers 3284, National Bureau of Economic Research, Inc.
    9. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    10. Sato, Kazuo, 1976. "The Ideal Log-Change Index Number," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 223-228, May.
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    Cited by:

    1. Peter Kuhn, "undated". "Canada and the "OECD Hypothesis": Does Labour Market Inflexibility Explain Canada's High Level of Unemployment?," Canadian International Labour Network Working Papers 10, McMaster University.
    2. Vahey, Shaun P., 2004. "Signalling ability to pay and rent sharing dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 28(11), pages 2327-2339, October.

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