Efficient Contracts with Costly Adjustment: Short-run Employment Determination for Airline Mechanics

David Card

American Economic Review, 1986, vol. 76, issue 5, 1045-71

Abstract: This paper presents an empirical analysis of firm-specific employment and wage outcomes for mechanics in the domestic airlines industry. A dynamic contracting model is presented that incorporates both costly employment adjustment and potential gaps between contract wage rates and the opportunity value of workers' time. The model gives a useful description of the employment-output linkage in the data, but is less successful in capturing the dynamic relation between employment, contract wage rates, and wage rates outside the airline industry. Copyright 1986 by American Economic Association.

Date: 1986
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