Labor Contracts, Equal Treatment, and Wage-Unemployment Dynamics

Andy Snell and Jonathan Thomas

American Economic Journal: Macroeconomics, 2010, vol. 2, issue 3, 98-127

Abstract: This paper analyses a model in which firms cannot pay discriminate based on year of entry. It is assumed that workers can costlessly quit at any time, while firms are committed to contracts. We solve for the dynamics of wages and unemployment, and show that real wages display a degree of downward rigidity and do not necessarily clear the labor market. Using sectoral productivity data from the post-war US economy, we assess the ability of the model to match the actual unemployment series. We also show that equal treatment follows from the assumption of at-will employment contracting in our model. (JEL E24, E32, J31, J41)

JEL-codes: E24 E32 J31 J41 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/mac.2.3.98
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Citations: View citations in EconPapers (21)

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Related works:
Working Paper: Labor Contracts, Equal Treatment and Wage-Unemployment Dynamics (2009)
Working Paper: Labor Contracts, Equal Treatment and Wage-Unemployment Dynamics (2006)
Working Paper: Labour Contracts, Equal Treatment and Wage-Unemployment Dynamics (2006)
Working Paper: Labor Contracts, Equal Treatment and Wage-Unemployment Dynamics (2006)
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