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Human Capital and Self-Enforcing Contracts

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  • Azaridis, C

Abstract

This essay analyzes labor contracts as a device for rearranging factor incomes over time when the lack of verifiable public information about future compensation prevents finitely-lived workers from borrowing against their earnings. Specific human capital is used as an incentive to implement intertemporal self-enforcing contracts between workers and firms. I propose a necessary and sufficient condition for the existence of such contracts, explore the re4sulting equilibrium earnings profiles, and investigate how imperfections in the credit market influence the way workers allocate time between current production and training.

Suggested Citation

  • Azaridis, C, 1987. "Human Capital and Self-Enforcing Contracts," The Warwick Economics Research Paper Series (TWERPS) 281, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:281
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