Limited Commitment Models of the Labour Market

Jonathan Thomas and Timothy Worrall

No KERP 2007/11, Keele Economics Research Papers from Centre for Economic Research, Keele University

Abstract: We present an overview of models of long-term self-enforcing labour contracts in which risk sharing is the dominant motive for contractual solutions. A base model is developed which is sufficiently general to encompass the two-agent problem central to most of the literature, including variable hours. We consider two-sided limited commitment and look at its implications for aggregate labour market variables. We consider the implications for empirical testing and the available empirical evidence. We also consider the one-sided limited commitment problem for which there exists a considerable amount of empirical support.

Keywords: Labour contracts; self-enforcing contracts; business cycle; unemployment. (search for similar items in EconPapers)
JEL-codes: E32 J41 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-09
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
Note: The authors gratefully acknowledge the financial support of the Economic and Social Research Council (Research Grant:RES-000-23-0865). We also thank Jim Malcomson, Leena Rudanko and Dongyun Shin for helpful comments on an earlier draft and the participants of the workshop on ``The theory and empirics of risk sharing'' at the Toulouse School of Economics, September 2007. The usual caveats apply.
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Related works:
Journal Article: LIMITED COMMITMENT MODELS OF THE LABOUR MARKET (2007)
Working Paper: Limited Commitment Models of the Labour Market (2007)
Working Paper: Limited Commitment Models of the Labour Market (2007)
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