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

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.