Intertemporal Labor Supply and Long-term Employment Contracts

John Abowd () and David Card

American Economic Review, 1987, vol. 77, issue 1, 50-68

Abstract: The authors compare the implications of a symmetric information contracting model and a dynamic labor supply model for changes in earnings and hours. A simple test is whether earnings changes are more variable than hours changes, as predicted by the labor supply model, or less variable, as predicted by the contracting model. The authors apply this test to two longitudinal surveys of adult men and find that earnings are somewhat more variable than hours for men who never change employers. The estimates suggest that changes in earnings and hours not associated with survey measurement error occur at fixed wage rates. Copyright 1987 by American Economic Association.

Date: 1987
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