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Limited Commitment Models of the Labour Market

  • Jonathan Thomas
  • Tim Worrall

We present an overview of models of long-term self-enforcing labor contracts in which risk sharing is the dominant motive for contractual solutions. A base model is developed which is sufficiently general to encompass the two-agent problem central to most of the literature, including variable hours. We consider two-sided limited commitment and look at its implications for aggregate labor market variables. We consider the implications for empirical testing and the available empirical evidence. We also consider the one-sided limited commitment problem for which there exists a considerable amount of empirical support.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2007/wp-cesifo-2007-10/cesifo1_wp2109.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2109.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2109
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  1. John Haltiwanger & Michael Waldman, 1985. "Insurance and Labor Market Contracting: An Analysis of the Capital Market Assumption," UCLA Economics Working Papers 370, UCLA Department of Economics.
  2. Leena Rudanko, 2005. "Labor Market Dynamics under Long Term Wage Contracting," 2005 Meeting Papers 876, Society for Economic Dynamics.
  3. Andy Snell & Jonathan Thomas, 2006. " Labor Contracts, Equal Treatment and Wage-Unemployment Dynamics," CDMA Conference Paper Series 0603, Centre for Dynamic Macroeconomic Analysis.
  4. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  5. Dirk Krueger & Harald Uhlig, 2003. "Competitive Risk Sharing Contracts with One-Sided Commitment," Levine's Bibliography 666156000000000407, UCLA Department of Economics.
  6. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-88, August.
  7. Malcomson, J., 1998. "Individual employment contracts," Discussion Paper Series In Economics And Econometrics 9804, Economics Division, School of Social Sciences, University of Southampton.
  8. Gary Solon & Robert Barsky & Jonathan A. Parker, 1992. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias," NBER Working Papers 4202, National Bureau of Economic Research, Inc.
  9. Pierre Dubois & Bruno Jullien & Thierry Magnac, 2008. "Formal and Informal Risk Sharing in LDCs: Theory and Empirical Evidence," CESifo Working Paper Series 2184, CESifo Group Munich.
  10. Michele Boldrin & Michael Horvath, 1994. "Labor Contracts and Business Cycles," Discussion Papers 1068, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Christian Sigouin, 2000. "Self-enforcing Employment Contracts and Business Cycle Fluctuations," Cahiers de recherche CREFE / CREFE Working Papers 127, CREFE, Université du Québec à Montréal.
  12. Michelacci, Claudio & Quadrini, Vincenzo, 2005. "Financial Markets and Wages," CEPR Discussion Papers 4867, C.E.P.R. Discussion Papers.
  13. Abowd, John M & Card, David, 1987. "Intertemporal Labor Supply and Long-term Employment Contracts," American Economic Review, American Economic Association, vol. 77(1), pages 50-68, March.
  14. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  15. Paul J. Devereux, 2001. "The cyclicality of real wages within employer-employee matches," Open Access publications 10197/312, School of Economics, University College Dublin.
  16. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 1998. "Mutual Insurance, Individual Savings and Limited Commitment," Keele Department of Economics Discussion Papers (1995-2001) 98/14, Department of Economics, Keele University.
  17. Darren Grant, 2003. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from the National Longitudinal Surveys," ILR Review, Cornell University, ILR School, vol. 56(3), pages 393-408, April.
  18. Jonathan Thomas & Tim Worrall, 1988. "Self-Enforcing Wage Contracts," Review of Economic Studies, Oxford University Press, vol. 55(4), pages 541-554.
  19. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  20. Donggyun Shin & Kwanho Shin, 2003. "Why Are The Wages of Job Stayers Procyclical?," ISER Discussion Paper 0573, Institute of Social and Economic Research, Osaka University.
  21. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  22. Shin, Donggyun, 1994. "Cyclicality of real wages among young men," Economics Letters, Elsevier, vol. 46(2), pages 137-142, October.
  23. Paul Beaudry & John DiNardo, 1995. "Is the Behavior of Hours Worked Consistent with Implicit Contract Theory?," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 743-768.
  24. Devereux, Paul J. & Hart, Robert A., 2005. "The Spot Market Matters: Evidence on Implicit Contracts from Britain," IZA Discussion Papers 1497, Institute for the Study of Labor (IZA).
  25. Rosen, Sherwin, 1985. "Implicit Contracts: A Survey," Journal of Economic Literature, American Economic Association, vol. 23(3), pages 1144-75, September.
  26. Gauthier, Celine & Poitevin, Michel & Gonzalez, Patrick, 1997. "Ex Ante Payments in Self-Enforcing Risk-Sharing Contracts," Journal of Economic Theory, Elsevier, vol. 76(1), pages 106-144, September.
  27. Sigouin, Christian, 2004. "Self-enforcing employment contracts and business cycle fluctuations," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 339-373, March.
  28. repec:kap:iaecre:v:13:y:2007:i:2:p:200-213 is not listed on IDEAS
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