TY  - JOUR
AU  - Arnott,Richard J.
AU  - Hosios,Arthur
AU  - Stiglitz,Joseph
TI  - Implicit Contracts, Labor Mobility and Unemployment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2316
PY  - 1990
Y2  - March 1990
UR  - http://www.nber.org/papers/w2316
L1  - http://www.nber.org/papers/w2316.pdf
N1  - Author contact info:
Richard J. Arnott
Department of Economics
Boston College
Chestnut Hill, MA 02467
Tel: 617/552-3674
Fax: 617/552-2308
E-Mail: richard.arnott@ucr.edu

Arthur Hosios
E-Mail: ahosios@chass.utoronto.ca

Joseph E. Stiglitz
Uris Hall, Columbia University
3022 Broadway, Room 814
New York, NY  10027
Tel: 212/854-0671
Fax: 212/662-8474
E-Mail: jes322@columbia.edu
AB  - Firms' inability to monitor their employees' search effort forces a tradeoff between risk-bearing and incentive considerations when designing employment-related insurance. Since the provision of insurance against firm-specific shocks adversely affects workers' incentives to find better jobs, the optimal contract provides only partial insurance: it prescribes low (high) wages and under (over) employment to encourage workers to leave (stay) at low (high) productivity firms; and it employs quits and layoffs as alternative means of inducing separations at low productivity firms, with the mix depending upon the relative efficiency of the on- and off-the-job search technologies. Our analysis of implicit contracts with asymmetric search information establishes that any consistent explanation for worksharing, layoffs, severance pay, quits and unemployment must focus on questions of labor mobility.
ER  -