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Delays in Renewal of Labor Contracts: Theory and Evidence

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  • Danziger, Leif

    () (Ben Gurion University)

  • Neuman, Shoshana

    () (Bar-Ilan University)

Abstract

In many countries, an expired labor contract is automatically extended during the often protracted delay before the new contract is signed. Our theoretical model focuses on macroeconomic factors in explaining the delay. It emphasizes the importance of the realized nominal and real shocks, and of the levels of nominal and real uncertainty. The model is tested using Israeli collective wage agreements where long delays are frequent. The empirical findings strongly support the theoretical model. Thus, nominal uncertainty is found to increase the delay, and real uncertainty to decrease the delay, but less in the public than in the private sector.

Suggested Citation

  • Danziger, Leif & Neuman, Shoshana, 2003. "Delays in Renewal of Labor Contracts: Theory and Evidence," IZA Discussion Papers 709, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp709
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    1. repec:ilo:ilowps:486459 is not listed on IDEAS
    2. Neuman, Shoshana., 2014. "Job quality in segmented labour markets : the Israeli case: country case study on labour market segmentation," ILO Working Papers 994864593402676, International Labour Organization.
    3. Robert Rich & Joseph Tracy, 2013. "Early Contract Renegotiation: An Analysis of US Labor Contracts, 1970-1995," Journal of Labor Economics, University of Chicago Press, vol. 31(4), pages 825-842.
    4. Louis Christofides & Amy Chen Peng, 2007. "Real Wage Chronologies," CESifo Working Paper Series 2096, CESifo Group Munich.
    5. Danziger, Leif, 2008. "Extension of labor contracts and optimal backpay," Labour Economics, Elsevier, vol. 15(1), pages 18-36, February.
    6. Robert W. Rich & Joseph Tracy, 2011. "Early contract renegotiation: An analysis of U.S. labor contracts from 1970 to 1995," Staff Reports 521, Federal Reserve Bank of New York.
    7. Sanvi Avouyi-Dovi & Denis Fougère & Erwan Gautier, 2013. "Wage Rigidity, Collective Bargaining, and the Minimum Wage: Evidence from French Agreement Data," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1337-1351, October.
    8. Neuman, Shoshana, 2015. "Job Quality in Segmented Labor Markets: The Israeli Case," CEPR Discussion Papers 10734, C.E.P.R. Discussion Papers.
    9. Amy Peng & Louis N. Christofides, 2009. "Real Wage Chronology," Working Papers 011, Ryerson University, Department of Economics.
    10. Shoshana Neuman, 2014. "Job Quality in Segmented Labor Markets: The Israeli Case," Working Papers 2014-12, Bar-Ilan University, Department of Economics.
    11. Holden, Helge & Holden, Lars & Holden, Steinar, 2010. "Contract adjustment under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 34(4), pages 657-680, April.
    12. Neuman, Shoshana, 2014. "Job Quality in Segmented Labor Markets: The Israeli Case," IZA Discussion Papers 8750, Institute for the Study of Labor (IZA).
    13. Louis Christofides & Chen Peng, 2006. "Major Provisions of Labour Contracts and their Theoretical Coherence," CESifo Working Paper Series 1700, CESifo Group Munich.

    More about this item

    Keywords

    renewal; delay; labor contract;

    JEL classification:

    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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