Efficient Contracts and Cost of Adjustment: Short-Run Employment Determination for Airline Mechanics

David Card

No 560, Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: This paper presents an empirical analysis of short-run employment determination for mechanics employed at seven domestic airline firms during the period 1969-1976. The link between output, contractual wage rates, aggregate wage rates and employment is explored in the framework of a model that permits costly adjustment and potential discrepancies between contractual wage rates and the opportunity value of workers' time. The estimation results confirm that simple partial adjustment employment models provide a useful description of the output-employment relationship. These models are less successful, however, in describing the effects of wages on firm-specific employment outcomes. There is some evidence against both a standard labor demand curve characterization of employment, and a simple efficient contracts characterization that equates the marginal product of labor to the alternative wage rate available to employees.

JEL-codes: C71 (search for similar items in EconPapers)
Date: 1984-11
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Persistent link: https://EconPapers.repec.org/RePEc:pri:indrel:180

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