IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Labor Contracts and Business Cycles

Listed author(s):
  • Boldrin, Michael
  • Horvath, Michael

This paper investigates the claim that real business cycle models perform poorly in matching real-world aggregate labor market behavior because observed real wage payments do not correspond to the actual marginal productivity of labor but contain an insurance component not accounted for by the Walrasian pricing mechanism. We introduce contractual arrangements between employees and employers and use the theory of optimal contracts to derive an equilibrium relation between aggregate states of the we economy and wage-labor outcomes. This contractual arrangement is then embedded into a standard one-sector, stochastic neoclassical growth model in order to look at the business cycle implications of the contractual hypothesis. Copyright 1995 by University of Chicago Press.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://dx.doi.org/10.1086/262010
File Function: full text
Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 103 (1995)
Issue (Month): 5 (October)
Pages: 972-1004

as
in new window

Handle: RePEc:ucp:jpolec:v:103:y:1995:i:5:p:972-1004
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
  2. Mankiw, N. Gregory & Zeldes, Stephen P., 1991. "The consumption of stockholders and nonstockholders," Journal of Financial Economics, Elsevier, vol. 29(1), pages 97-112, March.
  3. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  4. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-273, April.
  5. Robert E. Hall, 1988. "Substitution over Time in Work and Consumption," NBER Working Papers 2789, National Bureau of Economic Research, Inc.
  6. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  7. anonymous, 1982. "International economic situation and outlook," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 45, pages -, january/f.
  8. Hall, Stephen G, 1982. "Money and the Economics of Leon Walras," Scottish Journal of Political Economy, Scottish Economic Society, vol. 29(3), pages 246-255, November.
  9. N/A, 1982. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 100(1), pages 32-50, May.
  10. Anonymous, 1982. "The Biologic and Economic Assessment of 2, 4, 5-T," Technical Bulletins 157646, United States Department of Agriculture, Economic Research Service.
  11. Bacon, Peter & Durkan, Joe & O'Leary, J. & Scott, Susan, 1982. "Quarterly Economic Commentary, February 1982," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC19821, December.
  12. Kahn, Charles M. & Green, Jerry, 1983. "Wage-Employment Contracts," Scholarly Articles 3203642, Harvard University Department of Economics.
  13. N/A, 1982. "Intermediate Targets and Macroeconomic Policy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 99(1), pages 61-67, February.
  14. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1166-1187, December.
  15. Finger, J M & Hall, H Keith & Nelson, Douglas R, 1982. "The Political Economy of Administered Protection," American Economic Review, American Economic Association, vol. 72(3), pages 452-466, June.
  16. N/A, 1982. "Chapter II. The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 100(1), pages 51-64, May.
  17. Danthine, Jean Pierre & Donaldson, John B., 1992. "Risk sharing in the business cycle," European Economic Review, Elsevier, vol. 36(2-3), pages 468-475, April.
  18. N/A, 1982. "The Economic Situation," National Institute Economic Review, National Institute of Economic and Social Research, vol. 101(1), pages 3-8, August.
  19. Bacon, Peter & Durkan, Joe & Scott, Susan, 1982. "Quarterly Economic Commentary, December 1982," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC19824, December.
  20. Rotemberg, Julio J & Woodford, Michael, 1992. "Oligopolistic Pricing and the Effects of Aggregate Demand on Economic Activity," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1153-1207, December.
  21. anonymous, 1982. "Time and economics," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 4-5.
  22. Brock, William A. & Mirman, Leonard J., 1972. "Optimal economic growth and uncertainty: The discounted case," Journal of Economic Theory, Elsevier, vol. 4(3), pages 479-513, June.
  23. anonymous, 1982. "New Zealand economic chronology 1981," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 45, pages -, january/f.
  24. W. Guy Scott, 1982. "Fundamentals of managerial economics," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 3(1), pages 52-53, 03.
  25. N/A, 1982. "Chapter II. the World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 102(1), pages 27-38, November.
  26. Wright, Randall D, 1988. "The Observational Implications of Labor Contracts in a Dynamic General Equilibrium Model," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 530-551, October.
  27. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  28. Bacon, Peter & Durkan, Joe & O'Leary, J. & Scott, Susan, 1982. "Quarterly Economic Commentary, August 1982," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC19823, December.
  29. Altonji, Joseph & Ashenfelter, Orley, 1980. "Wage Movements and the Labour Market Equilibrium Hypothesis," Economica, London School of Economics and Political Science, vol. 47(187), pages 217-245, August.
  30. Anonymous, 1982. "The Biologic and Economic Assessment of DBCP," Technical Bulletins 157639, United States Department of Agriculture, Economic Research Service.
  31. anonymous, 1982. "Economic policy measures," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 45, pages -, july.
  32. Bacon, Peter & Durkan, Joe & O'Leary, J. & Scott, Susan, 1982. "Quarterly Economic Commentary, May 1982," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC19822, December.
  33. R. Glenn Hubbard & Kenneth L. Judd, 1986. "Liquidity Constraints, Fiscal Policy, and Consumption," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(1), pages 1-60.
  34. Attanasio, Orazio P., 1995. "The intertemporal allocation of consumption: theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 39-56, June.
  35. Sherwin Rosen, 1985. "Implicit Contracts: A Survey," NBER Working Papers 1635, National Bureau of Economic Research, Inc.
  36. Terry Ward, 1982. "Mrs. Thatcher's Economic Strategy in Practice," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 4(4), pages 516-530, July.
  37. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  38. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
  39. anonymous, 1982. "International economic situation and developments," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 45, pages -, august.
  40. Scott, John T, 1982. "Multimarket Contact and Economic Performance," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 368-375, August.
  41. Capper, Graham & Scott, Alex, 1982. "The economics of house heating: further findings," Energy Economics, Elsevier, vol. 4(2), pages 134-138, April.
  42. Tullio Jappelli, 1990. "Who is Credit Constrained in the U. S. Economy?," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 219-234.
  43. N/A, 1982. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 99(1), pages 6-28, February.
  44. Reder, Melvin W, 1982. "Chicago Economics: Permanence and Change," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 1-38, March.
  45. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834.
  46. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : II. New directions," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 309-341.
  47. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1, Enero.
  48. N/A, 1982. "Chapter I. the Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 102(1), pages 6-26, November.
  49. N/A, 1982. "Chapter II. The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 99(1), pages 29-50, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ucp:jpolec:v:103:y:1995:i:5:p:972-1004. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.