Insurance and Labor Market Contracting: An Analysis of the Capital Market Assumption
In recent years a large literature has developed that investigates the role of insurance in labor market contracting. Papers in this literature typically assume that workers are completely restricted from borrowing. The authors argue, and to some extent demonstrate, that in many environments capital market imperfections do not lead to a no-borrowing result, rather to a capital market assumption intermediate between the no-borrowing assumption and the perfect capital market assumptions. The authors consider some of the ramifications that this intermediate capital market assumption has on the type of insurance firms provide through the labor market contract. Copyright 1986 by University of Chicago Press.
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