Testing for Contracting Effects on Employment
The author tests for the importance of wage rigidities from long-term contracts by observing how employment responds when firms and workers recontract. If rigidities are important, then employment should adjust after recontracting to partially undo its movements during the past contract. The author examines twelve manufacturing industries that display a strong bargaining pattern. He finds employment does rebound after recontracting, particularly in motor vehicles. This implies that contract rigidities are important. The author also finds responses in wage growth at the beginning of new contracts; but these responses are not related to the pattern of employment responses across industries. Copyright 1991, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Volume (Year): 106 (1991)
Issue (Month): 4 (November)
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