Implicit Contracts, Trade Unions and Involuntary Unemployment

Anthony A Sampson

Bulletin of Economic Research, 1994, vol. 46, issue 1, 23-39

Abstract: Implicit contract theory is used to predict the nature of optimal wage-employment contracts between a firm and a union with a utilitarian maximand, under an uncertain revenue product of labour. By allowing recruitment of outsiders in good states, and allowing unemployment of union members in bad states, a rich set of possible trajectories in wages and employment is achieved. Monotonicity of employment in prices is preserved, whereas monotonicity of wages is not. Copyright 1994 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Date: 1994
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