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

  • Wallace, Frederick H

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.

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File URL: http://dx.doi.org/10.1086/322077
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 19 (2001)
Issue (Month): 3 (July)
Pages: 658-81

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Handle: RePEc:ucp:jlabec:v:19:y:2001:i:3:p:658-81
Contact details of provider: Web page: http://www.journals.uchicago.edu/JOLE/

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  1. Christofides, Louis N, 1985. "The Impact of Controls on Wage Contract Duration," Economic Journal, Royal Economic Society, vol. 95(377), pages 161-68, March.
  2. Christofides, L. N. & Wilton, D. A., 1983. "The determinants of contract length : An empirical analysis based on Canadian micro data," Journal of Monetary Economics, Elsevier, vol. 12(2), pages 309-319.
  3. Canzoneri, Matthew B., 1980. "Labor contracts and monetary policy," Journal of Monetary Economics, Elsevier, vol. 6(2), pages 241-255, April.
  4. Barro, Robert J., 1977. "Long-term contracting, sticky prices, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 305-316, July.
  5. repec:nbr:nberre:0126 is not listed on IDEAS
  6. Wallace, Frederick H. & Blanco, Herminio, 1991. "The effects of real and nominal shocks on union-firm contract duration," Journal of Monetary Economics, Elsevier, vol. 27(3), pages 361-380, June.
  7. Leaf Danziger, 1988. "Real Shocks, Efficient Risk Sharing, and the Duration of Labor Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 435-440.
  8. Mark Bils, 1991. "Testing for Contracting Effects on Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1129-1156.
  9. Kevin J. Murphy, 1992. "Determinants of Contract Duration in Collective Bargaining Agreements," ILR Review, Cornell University, ILR School, vol. 45(2), pages 352-365, January.
  10. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  11. Fischer, Stanley, 1977. "`Long-term contracting, sticky prices, and monetary policy' : A comment," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 317-323, July.
  12. Vroman, Susan B, 1989. "Inflation Uncertainty and Contract Duration," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 677-81, November.
  13. Mork, Knut Anton, 1989. "Oil and Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 740-44, June.
  14. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
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