IDEAS home Printed from https://ideas.repec.org/p/ags/uwarer/268330.html
   My bibliography  Save this paper

Human Capital And Self-Enforcing Contracts

Author

Listed:
  • Azariadis, Costas

Abstract

This essay analyzes labor contracts as a device for rearranging factor incomes over time when the lack of verifiable public information about future compensation prevents finitely-lived workers from borrowing against their earnings. Specific human capital is used as an incentive to implement intertemporal self-enforcing contracts between workers and firms. I propose a necessary and sufficient condition for the existence of such contracts, explore the resulting equilibrium earnings profiles, and investigate how imperfections in the credit market influence the way workers allocate time between current production and training.

Suggested Citation

  • Azariadis, Costas, 1987. "Human Capital And Self-Enforcing Contracts," Economic Research Papers 268330, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:268330
    DOI: 10.22004/ag.econ.268330
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/268330/files/twerp281.pdf
    Download Restriction: no
    File URL: https://ageconsearch.umn.edu/record/268330/files/twerp281.pdf?subformat=pdfa
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.268330?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    3. Fumio Hayashi, 1985. "The Effect of Liquidity Constraints on Consumption: A Cross-Sectional Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(1), pages 183-206.
    4. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    5. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-346, April.
    6. Farmer, Roger E A, 1984. "A New Theory of Aggregate Supply," American Economic Review, American Economic Association, vol. 74(5), pages 920-930, December.
    7. Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, vol. 49(5), pages 1127-1148, September.
    8. Clive Bull, 1987. "The Existence of Self-Enforcing Implicit Contracts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(1), pages 147-159.
    9. Carmichael, H Lorne, 1984. "Reputations in the Labor Market," American Economic Review, American Economic Association, vol. 74(4), pages 713-725, September.
    10. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-620, September.
    11. Seater, John J., 1977. "A unified model of consumption, labor supply, and job search," Journal of Economic Theory, Elsevier, vol. 14(2), pages 349-372, April.
    12. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    13. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
    14. Bartel, Ann P, 1980. "Earnings Growth on the Job and between Jobs," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 123-137, January.
    15. John Sutton, 1986. "Non-Cooperative Bargaining Theory: An Introduction," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(5), pages 709-724.
    16. Milton Harris & Bengt Holmstrom, 1982. "A Theory of Wage Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(3), pages 315-333.
    17. Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October.
    18. Ioannides, Yannis M., 1981. "Job search, unemployment and savings," Journal of Monetary Economics, Elsevier, vol. 7(3), pages 355-370.
    19. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    20. Sherwin Rosen, 1972. "Learning and Experience in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 7(3), pages 326-342.
    21. Bernanke, Ben, 1985. "Adjustment costs, durables, and aggregate consumption," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 41-68, January.
    22. Grossman, Sanford J & Hart, Oliver D & Maskin, Eric S, 1983. "Unemployment with Observable Aggregate Shocks," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 907-928, December.
    23. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
    24. Drazen, Allan, 1978. "Government Debt, Human Capital, and Bequests in a Life-Cycle Model," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 505-516, June.
    25. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75(4), pages 352-352.
    26. Jacob Mincer, 1962. "On-the-Job Training: Costs, Returns, and Some Implications," NBER Chapters, in: Investment in Human Beings, pages 50-79, National Bureau of Economic Research, Inc.
    27. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-748, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Azaridis, C, 1987. "Human Capital and Self-Enforcing Contracts," The Warwick Economics Research Paper Series (TWERPS) 281, University of Warwick, Department of Economics.
    2. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    3. repec:eee:labchp:v:2:y:1986:i:c:p:789-848 is not listed on IDEAS
    4. repec:eee:labchp:v:3:y:1999:i:pb:p:2291-2372 is not listed on IDEAS
    5. Azariadis, Costas, 1987. "Les marchés imparfaits dans la théorie macroéconomique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 63(4), pages 311-330, décembre.
    6. repec:eee:labchp:v:1:y:1986:i:c:p:603-640 is not listed on IDEAS
    7. Abel, Andrew B., 1990. "Consumption and investment," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 14, pages 725-778, Elsevier.
    8. de Brouwer,Gordon, 1999. "Financial Integration in East Asia," Cambridge Books, Cambridge University Press, number 9780521651486, September.
    9. Orazio P. Attanasio, 1998. "Consumption Demand," NBER Working Papers 6466, National Bureau of Economic Research, Inc.
    10. Mengistae, Taye, 1999. "The relative effects of skill formation and job matching on wage growth in Ethiopia," Policy Research Working Paper Series 2104, The World Bank.
    11. repec:idn:jimfjn:v:4:y:2018:i:1f:p:1-16 is not listed on IDEAS
    12. Julian Thimme, 2017. "Intertemporal Substitution In Consumption: A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 226-257, February.
    13. Orazio P. Attanasio & Guglielmo Weber, 2010. "Consumption and Saving: Models of Intertemporal Allocation and Their Implications for Public Policy," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 693-751, September.
    14. 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.
    15. Brady, Ryan R., 2008. "Structural breaks and consumer credit: Is consumption smoothing finally a reality?," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1246-1268, September.
    16. Carstensen, Vivian, 1999. "Beschäftigungssicherung durch Arbeitszeitflexibilisierung," Hannover Economic Papers (HEP) dp-228, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    17. Dan A. Black & Lars Skipper & Jeffrey A. Smith & Jeffrey Andrew Smith, 2023. "Firm Training," CESifo Working Paper Series 10268, CESifo.
    18. Ngo Van Long & Antoine Soubeyran & Raphael Soubeyran, 2014. "Knowledge acquisition within an organization: How to retain a knowledge worker using wage profile and non-monotonic knowledge accumulation," CIRANO Working Papers 2014s-32, CIRANO.
    19. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
    20. Chah, Eun Young & Ramey, Valerie A & Starr, Ross M, 1995. "Liquidity Constraints and Intertemporal Consumer Optimization: Theory and Evidence from Durable Goods," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 272-287, February.
    21. Holmstrom, Bengt R. & Tirole, Jean, 1989. "The theory of the firm," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 2, pages 61-133, Elsevier.
    22. repec:eee:labchp:v:1:y:1986:i:c:p:525-602 is not listed on IDEAS
    23. Petra Gerlach-Kristen, 2014. "Testing the Permanent Income Hypothesis for Irish Households, 1994 to 2005," The Economic and Social Review, Economic and Social Studies, vol. 45(4), pages 511-535.
    24. Maria Klonowska-Matynia & Radosław Sobko, 2021. "Spatial Analysis of the Relationship between Health Capital and the Level of Health Care Expenditure in Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 133-151.
    25. Vincenzo Scoppa, 2003. "Contratti incompleti ed enforcement endogeno. Una rassegna della letteratura," Economia politica, Società editrice il Mulino, issue 3, pages 391-440.
    26. Hansen, Hermann-Josef, 1996. "Der Einfluß der Zinsen auf den privaten Verbrauch in Deutschland," Discussion Paper Series 1: Economic Studies 1996,03, Deutsche Bundesbank.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:uwarer:268330. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.