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Uncertainty and Labor Contract Durations

  • Robert Rich
  • Joseph Tracy

This paper provides an empirical investigation into the relationship between ex ante U.S. labor contract durations and uncertainty over the period 1970 to 1995. We construct measures of inflation uncertainty as well as aggregate nominal and real uncertainty. The results not only corroborate previous findings of an inverse relationship between contract duration and inflation uncertainty, but document that this relationship extends to both measures of aggregate uncertainty. We also explore the robustness of this relationship to the various measures of inflation uncertainty that have appeared in the literature.

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File URL: http://www.nber.org/papers/w7731.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7731.

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Date of creation: Jun 2000
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Publication status: published as Robert Rich & Joseph Tracy, 2004. "Uncertainty and Labor Contract Durations," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 270-287, 01.
Handle: RePEc:nbr:nberwo:7731
Note: LS
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  1. Peter Cramton & Morley Gunderson & Joseph Tracy, 1999. "The Effect Of Collective Bargaining Legislation On Strikes And Wages," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 475-487, August.
  2. David Card, 1984. "An Empirical Model of Wage Indexation Provisions in Union Contracts," NBER Working Papers 1388, National Bureau of Economic Research, Inc.
  3. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Pagan, A R & Hall, A D & Trivedi, P K, 1983. "Assessing the Variability of Inflation," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 585-96, October.
  5. Kevin J. Murphy, 1992. "Determinants of contract duration in collective bargaining agreements," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(2), pages 352-365, January.
  6. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-59, July.
  7. Vroman, Susan B, 1989. "Inflation Uncertainty and Contract Duration," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 677-81, November.
  8. Wallace Hendricks & Larry M. Kahn, 1983. "Cost-of-living clauses in union contracts: Determinants and effects," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 36(3), pages 447-460, April.
  9. Christofides, Louis N, 1985. "The Impact of Controls on Wage Contract Duration," Economic Journal, Royal Economic Society, vol. 95(377), pages 161-68, March.
  10. Rich, R W & Raymond, J E & Butler, J S, 1992. "The Relationship between Forecast Dispersion and Forecast Uncertainty: Evidence from a Survey Data-ARCH Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(2), pages 131-48, April-Jun.
  11. Kevin J. Murphy, 1992. "Determinants of Contract Duration in Collective Bargaining Agreements," ILR Review, Cornell University, ILR School, vol. 45(2), pages 352-365, January.
  12. Wallace, Frederick H, 2001. "The Effects of Shock Size and Type on Labor-Contract Duration," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 658-81, July.
  13. Canzoneri, Matthew B., 1980. "Labor contracts and monetary policy," Journal of Monetary Economics, Elsevier, vol. 6(2), pages 241-255, April.
  14. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  15. Gali, Jordi, 1992. "How Well Does the IS-LM Model Fit Postwar U.S. Data," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 709-38, May.
  16. Cousineau, Jean-Michel & Lacroix, Robert & Bilodeau, Danielle, 1983. "The Determination of Escalator Clauses in Collective Agreements," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 196-202, May.
  17. Levi, Maurice D & Makin, John H, 1980. "Inflation Uncertainty and the Phillips Curve: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 70(5), pages 1022-27, December.
  18. Benjamin M. Friedman & Kenneth N. Kuttner, 1996. "A price target for U.S. monetary policy? Lessons from the experience with money growth targets," Working Paper Series, Macroeconomic Issues WP-96-14, Federal Reserve Bank of Chicago.
  19. Ronald G. Ehrenberg & Leif Danziger & Gee San, 1982. "Cost-of-Living Adjustment Clauses in Union Contracts," NBER Working Papers 0998, National Bureau of Economic Research, Inc.
  20. Mullineaux, Donald J, 1980. "Unemployment, Industrial Production, and Inflation Uncertainty in the United States," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 163-69, May.
  21. Victor Zarnowitz & Louis A. Lambros, 1983. "Consensus and Uncertainty in Economic Prediction," NBER Working Papers 1171, National Bureau of Economic Research, Inc.
  22. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
  23. Schnell, John F & Gramm, Cynthia L, 1987. "Learning by Striking: Estimates of the Teetotaler Effect," Journal of Labor Economics, University of Chicago Press, vol. 5(2), pages 221-41, April.
  24. Cukierman, Alex & Wachtel, Paul, 1979. "Differential Inflationary Expectations and the Variability of the Rate of Inflation: Theory and Evidence," American Economic Review, American Economic Association, vol. 69(4), pages 595-609, September.
  25. Danziger, Leif, 1988. "Real Shocks, Efficient Risk Sharing, and the Duration of Labor Contracts," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 435-40, May.
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