In this paper we develop and test a very general implication of
competitive contractual arrangements in the labor market. Toward this end
we examine whether the level of unemployment prevailing at the beginning of
the job has lasting effects on wage payments throughout the job. The
intuition behind this test is straightforward. If the labor market
functions as a competitive contracting market, then it is the supply and
demand conditions at the time of negotiating the contract that determine
the wage provisions of the contract. Using data from the Current
Population Survey (CPS) and the Panel Study of Income Dynamics (PSID) we
find that wages strongly depend on the labor market conditions prevailing
at the beginning of one’s job. Moreover, our results indicate that the
value of new employment contracts varies by approximately l0 percent over
the business cycle.
implicit contracts
Abstract
Year of Publication
1989
Number
252
Date Published
05/1989
Publication Language
eng
Citation Key
8115
DiNardo, J., & Beaudry, P. (1989). Long-Term Contracts and Equilibrium Models of the Labor Market: Some Favorable Evidence. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01kd17cs85n (Original work published May 1989)
Working Papers
Keywords
Abstract
This paper presents data on airline mechanics at eight of the
largest U.S. airlines and describes the impact of the 1978 Airline
Deregulation Act on their wage rates and employment levels. The major
findings are: (1) up to 1983, real and relative wage rates of airline
mechanics remained more or less constant across firms and over time; (2)
the independence of mechanics’ wage rates from firm-specific employment
conditions after 1978 is consistent with pre-deregulatory experiences;
(3) deregulation contributed to an existing trend of declining
employment; and (4) deregulation did not bring about any systematic
increase in mechanics’ productivity.
Year of Publication
1985
Number
193
Date Published
06/1985
Publication Language
eng
Citation Key
Journal of Political Economy, Vol. 94, No. 3, 1986
Ashenfelter, O., & Brown, J. (1985). Testing the Efficiency of Employment Contracts. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01hq37vn59z (Original work published June 1985)
Working Papers