Insider-Outsider Theory and the Case for Implicit Contracts

Derek Leslie

Economic Journal, 1992, vol. 102, issue 410, 37-48

Abstract: The purpose of this paper is to show that insider-outsider theory and implicit contracts are complementary rather than rival theories. Insider-outsider theory introduces some realistic institutional detail into implicit contracts, and insider-outsider theory is enriched by a more careful consideration of optimal wage contracts under conditions of uncertainty, which is the main comparative advantage of the implicit contract approach. The paper introduces a hybrid model and shows how the predictions of both approaches are modified. Copyright 1992 by Royal Economic Society.

Date: 1992
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