Implicit contract theory is used to predict the nature of optimal wage-employment contracts between a firm and a union with a utilitarian maximand, under an uncertain revenue product of labour. By allowing recruitment of outsiders in good states, and allowing unemployment of union members in bad ...
Since, in contractual markets, wages contain information on the economic conditions when the contract was (re)negotiated, the relevance of past unemployment rates has been considered as evidence for implicit contracts. We tackle two issues that cloud this interpretation. First, such history dependence...
Explain the concepts of Implicit contracts. Why do employers prefer to have implicit contracts? What is the impact of implicit contracts on the unemployment rate? Explain how people make choices using marginal benefits and marginal costs. Explain the term "cost-benefit analysis" and give the situ...
This paper deals with a recent development in labour economics - that of implicit contract theory. A major impetus to its development has been the existence of involuntary unemployment and wage rigidity. In reality, there have been two streams of development - one associated with the name of ...
This paper deals with a recent development in labour economics - that of implicit contract theory. A major impetus to its development has been the existence of involuntary unemployment and wage rigidity. In reality, there have been two streams of development - one associated with the name of ...
UNEMPLOYMENTCONSUMPTIONEMPLOYMENTBEHAVIORWAGESTIMEThe implicit contract model is a serious alternative to the spot market interpretation of the labor market. However, its usefulness has been limited because the wage is unobserved, and hence it has not been possible to estimate an intertemporal (Frisch) ...