David M. Lilien
Irvine, CA 927153458
Tel: 714/856-3368 Daytime or 714/856-6232
NBER Working Papers and Publications
|December 1978||Efficient Wage Bargains Under Uncertain Supply and Demand|
with Robert E. Hall: w0306
Much recent thought has been devoted to the macroeconomic importance of the existence of wage contracts. Still, some puzzling features of the most conspicuous form of wage bargaining, that done formally by employers and labor unions, deserve further theoretical attention. Among these important features are: 1. Collective bargaining agreements are rarely contingent on outside events even though the parties have very imperfect knowledge of prospective economic conditions during the period of the contract. The only important exception is the indexing of wages to the cost of living. 2. Employers are permitted wide discretion in determining the level of employment when demand shifts unexpectedly. As employment varies, total compensation varies according to a formula established in the agreement...
Published: Hall, Robert E. and Lilien, David M. "Efficient Wage Bargains under Uncertain Supply and Demand." The American Economic Review, Vol. 69, No. 5, (December 1979), pp. 868-879. citation courtesy of