TY  - JOUR
AU  - Green,Jerry R.
AU  - Kahn,Charles M.
TI  - Wage-Employment Contracts: Global Results
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 675
PY  - 1981
Y2  - May 1981
UR  - http://www.nber.org/papers/w0675
L1  - http://www.nber.org/papers/w0675.pdf
N1  - Author contact info:
Jerry R. Green
Harvard Business School
Baker Library 469
Soldiers Field
Boston, MA 02163
Tel: 617/495-6859
E-Mail: jgreen@hbs.edu

Charles Kahn
Dept. of Finance
University of Illinois, 1206 S. Sixth St.
340 Wohlers Hall
Champaign IL 61820
E-Mail: c-kahn@uiuc.edu
AB  - 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.
ER  -