LIMITED COMMITMENT MODELS OF THE LABOUR MARKET |
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Authors: | Jonathan P Thomas Tim Worrall |
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Institution: | University of Edinburgh; Keele University |
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Abstract: | We present an overview of models of long-term self-enforcing labour contracts in which risk-sharing is the dominant motive for contractual solutions. A base model is developed that is sufficiently general to encompass the two-agent problem central to most of the literature, including variable hours. We consider two-sided limited commitment and look at its implications for aggregate labour market variables. We consider the implications for empirical testing and the available empirical evidence. We also consider the one-sided limited commitment problem for which there exists a considerable amount of empirical support. |
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Keywords: | Labour contracts self-enforcing contracts business cycle un-employment |
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