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A note on labor contracts with private information and household production

  • Ed Nosal
  • Richard Rogerson
  • Randall Wright

A classic result in the theory of implicit contract models with asymmetric information is that “underemployment” results if and only if leisure is an inferior good. We introduce household production into the standard implicit contract model and show that we can have underemployment at the same time that leisure is a normal good.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 131.

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Date of creation: 1991
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Handle: RePEc:fip:fedmsr:131
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  1. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1990. "Homework In Macroeconomics Ii: Aggregate Fluctuations," Working Papers 90-18, C.V. Starr Center for Applied Economics, New York University.
  2. Grossman, Sanford J & Hart, Oliver D, 1981. "Implicit Contracts, Moral Hazard, and Unemployment," American Economic Review, American Economic Association, vol. 71(2), pages 301-07, May.
  3. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  4. Jeremy Greenwood & Zvi Hercowitz, 1990. "The allocation of goods and time over the business cycle," Discussion Paper / Institute for Empirical Macroeconomics 26, Federal Reserve Bank of Minneapolis.
  5. Cooper, Russell, 1983. "A note on overemployment/underemployment in labor contracts under asymmetric information," Economics Letters, Elsevier, vol. 12(1), pages 81-87.
  6. Juster, F Thomas & Stafford, Frank P, 1991. "The Allocation of Time: Empirical Findings, Behavioral Models, and Problems of Measurement," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 471-522, June.
  7. Jess Benhabib & Randall Wright & Richard Rogerson, 1990. "Homework in Macoreconomics I: Basic Theory (Part I of II)," NBER Working Papers 3344, National Bureau of Economic Research, Inc.
  8. Gronau, Reuben, 1987. "Home production -- A survey," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 4, pages 273-304 Elsevier.
  9. Gronau, Reuben, 1980. "Home Production-A Forgotten Industry," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 408-16, August.
  10. Chari, V V, 1983. "Involuntary Unemployment and Implicit Contracts," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 107-22, Supplemen.
  11. Rios-Rull, Jose-Victor, 1993. "Working in the Market, Working at Home, and the Acquisition of Skills: A General-Equilibrium Approach," American Economic Review, American Economic Association, vol. 83(4), pages 893-907, September.
  12. Baily, Martin Neil, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 37-50, January.
  13. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1990. "Homework In Macroeconomics I: Basic Theory," Working Papers 90-17, C.V. Starr Center for Applied Economics, New York University.
  14. Kahn, Charles M. & Green, Jerry, 1983. "Wage-Employment Contracts," Scholarly Articles 3203642, Harvard University Department of Economics.
  15. Azariadis, Costas, 1983. "Employment with Asymmetric Information," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 157-72, Supplemen.
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