Efficient Contracts with Costly Adjustment: Short-RUn Employment Determination for Airline Mechanics
NBER Working Paper No. 1931
This paper presents an empirical analysis of firm-specific
employment and wage outcomes for mechanics in the domestic airline
industry. A dynamic contracting model is presented that incorporates
both costly employment adjustment and potential gaps between contract
wage rates and the opportunity value of workers' time. The model gives
a useful description of the employment-output linkage in the data, but
is less successful in capturing the dynamic relation between employment,
contract wage rates, and wage rates outside the airline industry.
Published: Card, David. "Efficient Contracts with Costly Adjustment: Short-Run Employment Determination for Airline Mechanics," American Economic Review, Vol. 7 6, No. 5, December 1986, pp.1045-1071.