Did American Welfare Capitalists Breach their Implicit Contracts? Preliminary Findings from Company-level Data, 1920-1940

Chiaki Moriguchi

No 9868, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: It has been claimed that American employers' experiments in private welfare capitalism collapsed during the Great Depression and were subsequently replaced by the welfare state and industrial unionism. However, recent studies reveal considerable differences among firms, adding complex nuances to a simple story of discontinuation. Characterizing private welfare capitalism as a set of personnel practices that constituted an implicit contract equilibrium, this paper compiles data of fourteen manufacturing firms and tests the implications of implicit contract theory. It finds that the repudiation of implicit contracts was positively correlated with the severity of the depression experienced by a firm and negatively correlated with the effectiveness of internal enforcement mechanisms. It also shows that a firm with more repudiation experienced greater change in labor-management relations under the New Deal regime. A comparative case study complements the findings by providing quantitative evidence.

JEL-codes: N32 N82 (search for similar items in EconPapers)
Date: 2003-07
Note: DAE LS
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Citations: View citations in EconPapers (1)

Published as Moriguchi, Chiaki. "Implicit Contracts, The Great Depression, And Institutional Change: A Comparative Analysis Of U.S. And Japanese Employment Relations, 1920-1940," Journal of Economic History, 2003, v63(3,Sep), 625-665.

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