Macroeconomic Dynamics with Limited Commitment in Financial and Labor Contracts

Shingo Ishiguro

No 16-25, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: WThis paper presents a dynamic general equilibrium model to investigate the coevolution of employment and financial systems in the process of economic development when firms f commitment to financial and labor contracts is limited. We show that equilibrium modes of financial and labor contracts endogenously change from the informal contracting phase in which both of them are implicitly self-enforced to the formal contracting phase in which they are formally enforced and become more market-based as economies develop well. Furthermore, the formal contracting phase is irreversible in the sense that, once the economy enters that regime, it never returns back to the informal contracting phase.

Keywords: Dynamic General Equilibrium; Insider Lending; Implicit and Explicit Labor Contracts; Market Lending (search for similar items in EconPapers)
JEL-codes: D86 J41 J64 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2016-10
New Economics Papers: this item is included in nep-dge, nep-iue and nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1625

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