Wage-Employment Contracts: Global Results / Jerry R. Green, Charles M. Kahn.

Format:

Book

Author/Creator:

Green, Jerry R.

Contributor:

National Bureau of Economic Research.

Kahn, Charles M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0675.

NBER working paper series no. w0675

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Wage-Employment Contracts

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1981.

Summary:

This paper studies the efficient agreements about the dependence of workers' earnings on employment, when the employment level is controlled by firms. The firms ' superior information about profitability conditions is responsible for this form of contract governance. Under plausible assumptions, such agreements will cause employment to diverge from efficiency as a byproduct of their attempt to mitigate risk. It is shown that, if leisure is a normal good and firms are risk neutral, employment is always above the efficient level. Such a one-period implicit contracting model cannot, therefore, be used to "explain" unemployment as a rational byproduct of risk sharing between workers and a risk neutral firm under conditions of asymmetric information.

Notes:

Print version record

May 1981.