The Spot Market Matters: Evidence on Implicit Contracts from Britain
Based on the methodology of Beaudry and DiNardo (1991), this paper investigates the relative importance of the spot market and implicit contracts in the determination of British real wages. Empirical work is carried out separately for males and females with individual-level data taken from the New Earnings Survey Panel for the years 1976 to 2001. In contrast to previous studies that used North American data, the spot market is found to be more important than implicit contracts in determining real wages. Indeed, there is very little support for implicit contracts in these data. Further evidence is provided through the analysis of individual wage sequences. These suggest that the downwardly rigid wage sequences implied by implicit contracts with costless worker mobility are not prevalent in Britain.
|Date of creation:||Feb 2005|
|Date of revision:|
|Publication status:||published in: Scottish Journal of Political Economy, 2007, 54 (5), 661-683 (Special Issue on Labour Contracts and Wages over the Cycle)|
|Contact details of provider:|| Postal: |
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
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.:
- Harris, Milton & Holstrom, Bengt, 1982.
"A Theory of Wage Dynamics,"
Review of Economic Studies,
Wiley Blackwell, vol. 49(3), pages 315-33, July.
- Thomas, Jonathan & Worrall, Tim, 1988. "Self-enforcing Wage Contracts," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 541-54, October.
- Malcomson, J., 1998.
"Individual employment contracts,"
Discussion Paper Series In Economics And Econometrics
9804, Economics Division, School of Social Sciences, University of Southampton.
- McDonald, J.T. & Worswick, C., 1997.
"Wages, Implicit Contracts and the Business Cycle: Evidence from Canadian Micro Data,"
Department of Economics - Working Papers Series
588, The University of Melbourne.
- James Ted McDonald & Christopher Worswick, 1999. "Wages, Implicit Contracts, and the Business Cycle: Evidence from Canadian Micro Data," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 884-913, August.
- Baily, Martin Neil, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 37-50, January.
- Brown, James N & Light, Audrey, 1992. "Interpreting Panel Data on Job Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 219-57, July.
- 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.
- 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.
- Solon, Gary & Barsky, Robert & Parker, Jonathan A, 1994. "Measuring the Cyclicality of Real Wages: How Important Is Composition Bias?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 1-25, February.
- Hogan, Chad, 2001. "Enforcement of Implicit Employment Contracts through Unionization," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 171-95, January.
- Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
- Gary Solon & Warren Whatley & Ann Huff Stevens, 1997. "Wage changes and intrafirm job mobility over the business cycle: Two case studies," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 50(3), pages 402-415, April.
- Marianne Bertrand, 1999.
"From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship,"
NBER Working Papers
6900, National Bureau of Economic Research, Inc.
- Marianne Bertrand, 2004. "From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 723-766, October.
- Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
- MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp1497. 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: (Mark Fallak)
If references are entirely missing, you can add them using this form.