Labour Contracts, Equal Treatment and Wage-Unemployment Dynamics

Andy Snell and Jonathan Thomas

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: This paper analyses a model in which firms cannot pay discriminate based on year of entry to a firm, and develops an equilibrium model of wage dynamics and unemployment. The model is developed under the assumption of worker mobility, so that workers can costlessly quit jobs at any time. Firms on the other hand are committed to contracts. Thus the model is related to Beaudry and DiNardo (1991). We solve for the dynamics of wages and unemployment, and show that real wages 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 actual unemployment and wage series. We also show that equal treatment follows in our model from the assumption of at-will employment contracting.

Keywords: labor contracts; business cycle; unemployment; equal treatment; cohort effects (search for similar items in EconPapers)
JEL-codes: E32 J41 (search for similar items in EconPapers)
Pages: 41
Date: 2006-07
New Economics Papers: this item is included in nep-bec, nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.econ.ed.ac.uk/papers/id144_esedps.pdf

Related works:
Journal Article: Labor Contracts, Equal Treatment, and Wage-Unemployment Dynamics (2010)
Working Paper: Labor Contracts, Equal Treatment and Wage-Unemployment Dynamics (2009)
Working Paper: Labor Contracts, Equal Treatment and Wage-Unemployment Dynamics (2006)
Working Paper: Labor Contracts, Equal Treatment and Wage-Unemployment Dynamics (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:144

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