Title

Contract-Theoretic Approaches to Wages and Displacement

Document Type

Discussion Paper

Publication Date

4-1-1999

CFDP Number

1216

CFDP Pages

27

Abstract

This paper develops a theoretical framework for analyzing contracting imperfections in long-term employment relationships. We focus chiefly on limited enforceability and limited worker liquidity. Inefficient severance of employment relationships, payment of efficiency wages, the relative responses of wages and employment to business cycle shocks, and the propagation of these shocks are linked to the nature of contracting imperfections.

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