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Enforcement of Implicit Employment Contracts through Unionization

  • Hogan, Chad
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    In a world in which employment contracts are incomplete, it is costly for a firm to establish credibility for honoring implicit terms of employment agreements. By monitoring the employment relationships between the firm and its workers, the labor union may provide the workforce with valuable information regarding the firm's adherence to these implicit agreements. Thus, the union provides a signaling mechanism that allows workers to coordinate their actions in order to discipline the firm for a breach of the implicit contract. This mechanism enhances the firm's credibility when forming employment contracts and facilitates increased employment levels. Copyright 2001 by University of Chicago Press.

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    File URL: http://dx.doi.org/10.1086/209983
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    Article provided by University of Chicago Press in its journal Journal of Labor Economics.

    Volume (Year): 19 (2001)
    Issue (Month): 1 (January)
    Pages: 171-95

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    Handle: RePEc:ucp:jlabec:v:19:y:2001:i:1:p:171-95
    Contact details of provider: Web page: http://www.journals.uchicago.edu/JOLE/

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    7. Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
    8. W. Bentley MacLeod & James M. Malcomson, 1986. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Working Papers 585, Queen's University, Department of Economics.
    9. Farber, Henry S, 1978. "Individual Preferences and Union Wage Determination: The Case of the United Mine Workers," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 923-42, October.
    10. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June.
    11. Grossman, Sanford J & Hart, Oliver D, 1981. "Implicit Contracts, Moral Hazard, and Unemployment," American Economic Review, American Economic Association, vol. 71(2), pages 301-07, May.
    12. Carruth, Alan A & Oswald, Andrew J, 1985. "Miners' Wages in Post-war Britain: An Application of a Model of Trade Union Behaviour," Economic Journal, Royal Economic Society, vol. 95(380), pages 1003-20, December.
    13. Pearce, David G. & Stacchetti, Ennio, 1998. "The Interaction of Implicit and Explicit Contracts in Repeated Agency," Games and Economic Behavior, Elsevier, vol. 23(1), pages 75-96, April.
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