NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Wage-Employment Contracts (Replaced by W0675)

Jerry R. Green

NBER Working Paper No. 623
Issued in 1981
NBER Program(s):   EFG

This paper studies the efficient agreements about the dependence of workers' earnings on employment, when the employment level is controlled by firms. Under plausible assumptions, such agreements will cause employment to diverge from efficiency as a byproduct of their attempt to mitigate risk. However, employment is above rather than below the efficient level when the conditions of profitability are worse than average. Such a one- period implicit contracting model cannot, therefore, be used to "explain" unemployment as it is traditionally conceived.

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Document Object Identifier (DOI): 10.3386/w0623

Published: Green, Jerry and Charles M. Kahn. "Wage-Employment Contracts," Quarterly Journal of Economics, 1983, v98(Supp), 173-188.

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