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The Effects of Shock Size and Type on Labor-Contract Duration

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  • Wallace, Frederick H

Abstract

Empirical studies of the relation between uncertainty and the length of union-firm contracts have focused on the effects of inflation, money-supply, or industry-specific uncertainty. This article describes two extensions of previous work. First, real, aggregate uncertainty arising from oil shocks is incorporated into a contract-duration model. Oil shocks significantly affect contract length in seven of 21 U.S. manufacturing industries. Second, the model is used to test whether the duration of reopenable bargains is positively related to uncertainty associated with large shocks, as has been described in Danziger. The evidence indicates some qualified support for this proposition. Copyright 2001 by University of Chicago Press.

Suggested Citation

  • Wallace, Frederick H, 2001. "The Effects of Shock Size and Type on Labor-Contract Duration," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 658-681, July.
    • Handle: RePEc:ucp:jlabec:v:19:y:2001:i:3:p:658-81
    DOI: 10.1086/322077
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    References listed on IDEAS

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    Cited by:

    1. Christofides, Louis N. & Peng, Chen, 2006. "Contract duration and indexation in a period of real and nominal uncertainty," Labour Economics, Elsevier, vol. 13(1), pages 61-86, February.
    2. Hsuan-Yu Lin & Chih-Hai Yang, 2016. "Uncertainty, specific investment, and contract duration: evidence from the MLB player market," Empirical Economics, Springer, vol. 50(3), pages 1009-1028, May.
    3. Robert Rich & Joseph Tracy, 2004. "Uncertainty and Labor Contract Durations," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 270-287, February.
    4. Danziger, Leif, 2008. "Extension of labor contracts and optimal backpay," Labour Economics, Elsevier, vol. 15(1), pages 18-36, February.
    5. Danziger, Leif, 2010. "Uniform and nonuniform staggering of wage contracts," Labour Economics, Elsevier, vol. 17(6), pages 1038-1049, December.
    6. Brickley, James A & Misra, Sanjog & Van Horn, R Lawrence, 2006. "Contract Duration: Evidence from Franchising," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 173-196, April.
    7. Panu Poutvaara & Tuomas Takalo & Andreas Wagener, 2017. "The Optimal Duration of Contracts," CESifo Working Paper Series 6808, CESifo.
    8. Louis Christofides & Chen Peng, 2006. "Major Provisions of Labour Contracts and their Theoretical Coherence," CESifo Working Paper Series 1700, CESifo.
    9. Meng-Chi Tang, 2015. "Contract Length, Expected Surplus, and Specific Investments," Journal of Sports Economics, , vol. 16(3), pages 295-311, April.

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