Self-Enforcing Labour Contracts and Macroeconomic Dynamics |
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Authors: | Christian Calmès |
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Institution: | (1) 101 rue Saint Jean Bosco, CP 1250, succ. Hull, J8X 3X7 Gatineau, Quebec, Canada |
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Abstract: | To properly account for the dynamics of the key macroeconomic variables, researchers incorporate various internal propagation
mechanisms in their models. In general, these mechanisms implicitly rely on the assumption of a perfect equality between the
real wage and the marginal product of labour. This paper features a micro-founded model of a limited-commitment firm, and
derive endogenous dynamic labour contracts that produce a different linkage between the real wage and the marginal product
of labour. The risk-sharing between the entrepreneur and the worker, both faced with enforcement problems, provides a different
type of propagation mechanism. I investigate the dynamic properties of this endogenous rigidity in relation to the initial
bargaining power of each agent.
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Keywords: | internal propagation mechanisms real business cycle risk-sharing hypothesis |
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