Work

Implicit Contracts, Labor Mobility, and Unemployment

Year: 1988

Type: article

Abstract: When workers' search efforts are unobservable, the provision of insurance against firm-specific shocks adversely affects their incentives to find better jobs. In consequence, the equilibrium contract prescribes low wages and underemployment to encourage workers to leave low-productivity firms; and it employs both quits and layoffs to induce separations, with the mix depending both on the relative efficiency of on- and off-the-job search and on the search-incentive effects of layoffs.

Source: American Economic Review

DOI: 10.7916/d8sq99dx

Authors: Stiglitz, Joseph E., Arnott, Richard J., Hosios, Arthur J.

Institutions: National Bureau of Economic Research, University of Toronto, Princeton University, Queen's University

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: bronze

OpenAlex ID: W3124479133

FWCI: 6.25

Cites: 29

Cited by: 56

Related to: 10