Contract Inefficiency, Wages and Employment: An Assessment

James Malcomson

Chapter 11 in Economics in a Changing World, 1995, pp 221-249 from Palgrave Macmillan

Abstract: Abstract This chapter assesses some of the recent literature on ‘contract inefficiency’ in employment. Two main sources of potential inefficiency in labour markets have been widely discussed in the literature: (i) the process by which employee meets employer to start negotiations is inefficient; and (ii) the wage/employment/effort outcomes agreed once employer and employee (or their representatives) have started negotiating are inefficient. It is the latter to which I apply the term ‘contract inefficiency’. The former gives rise to the inefficiencies discussed in the search and matching literature. These are well surveyed in Mortensen (1986) and, although that survey is now somewhat dated, I do not attempt to update it here.

Keywords: Excess Return; Reservation Wage; Lifetime Utility; Efficiency Wage; Piece Rate (search for similar items in EconPapers)
Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:pal:intecp:978-1-349-23953-5_11

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DOI: 10.1007/978-1-349-23953-5_11

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