Efficient Contracts with Costly Adjustment: Short-RUn Employment Determination for Airline Mechanics

David Card

NBER Working Paper No. 1931
Issued in May 1986
NBER Program(s):   LS

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.

(378 K)

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.

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