Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment
W. Bentley Macleod and
James Malcomson ()
Econometrica, 1989, vol. 57, issue 2, pages 447-80
The theoretical foundations of efficiency wages are explored for a model with employees' performance unverifiable. The set of outcomes implementable by self-enforcing (perfect equilibrium) implicit bilateral contracts is characterized. Market equilibrium is then analyzed. Perfect equilibria exist with any division between firm and employee of the gains from employment and with unfilled vacancies and unemployed workers occurring together. A renegotiation proofness criterion ensures that either all workers are employed or all jobs filled, but any division of the gains is still possible. Restrictions on beliefs that result in a Walrasian outcome, and in an efficiency wage outcome, are explored. Copyright 1989 by The Econometric Society.
References: Add references at CitEc
Citations View citations in EconPapers (190) Track citations by RSS feed
Downloads: (external link)
http://links.jstor.org/sici?sici=0012-9682%2819890 ... O%3B2-5&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
Working Paper: Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment (1986)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:ecm:emetrp:v:57:y:1989:i:2:p:447-80
Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues
Access Statistics for this article
Econometrica is currently edited by Daron Acemoglu
More articles in Econometrica from Econometric Society
Contact information at EDIRC.
Series data maintained by Wiley-Blackwell Digital Licensing ().