A Risk-Sharing View of Real Wages and Contract Length

Christopher Ragan ()

Canadian Journal of Economics, 1995, vol. 28, issue 4b, 1161-79

Abstract: This paper models a union and firm choosing between long labor contracts, in which wages are predetermined, and short contracts, in which wages are flexible. It is shown that the union strictly prefers short contracts because it dislikes the greater employment volatility in long contracts. In contrast, the convexity of the firm's profit function leads the firm to prefer the greater uncertainty of long contracts. The model predicts that workers are prepared to enter long contracts only if they are compensated with a higher real wage. This prediction is tested using a large sample of Canadian collective agreements, with generally supportive results.

Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cje:issued:v:28:y:1995:i:4b:p:1161-79

Ordering information: This journal article can be ordered from
https://www.economic ... ionen/membership.php

Access Statistics for this article

Canadian Journal of Economics is currently edited by Zhiqi Chen

More articles in Canadian Journal of Economics from Canadian Economics Association Canadian Economics Association Prof. Werrner Antweiler, Treasurer UBC Sauder School of Business 2053 Main Mall Vancouver, BC, V6T 1Z2. Contact information at EDIRC.
Bibliographic data for series maintained by Prof. Werner Antweiler ().