Search Results
Journal Article
This time may not be that different: labor markets, the Great Recession and the (not so great) recovery
The last three U.S. recessions have been followed by ?jobless recoveries.? The lack of robust job growth once GDP starts to pick up has a lot people asking if labor markets have changed in some fundamental way. I look at employment and unemployment growth in every recession since the 1950s and find that the current levels of these indicators can be explained by the severity of the Great Recession and the slow growth of GDP in the recovery.
Working Paper
When should labor contracts be nominal?
This paper proposes a theory of when labor contract should be nominal or, instead, indexed. We find that, contracts should be indexed if prices are difficult to forecast and nominal otherwise. We use a principal-agent model developed by Jovanovic and Ueda (1997), with moral hazard, renegotiation, and where a signal (the nominal value of the sales of the agent) is observed before renegotiation takes place. We show that their result, that the optimal contract is nominal when agents must choose pure strategies, is robust to the case where agents can choose mixed strategies in the sense that, for ...
Conference Paper
Indexation and contract length in unionized U.S. manufacturing
Working Paper
What are the short-run effects of increasing labor market flexibility?
This paper evaluates the short-run effects of introducing labor market flexibility to an economy characterized by large firing taxes. Different reforms are considered: 1) eliminating all firing taxes, 2) introducing flexible new contracts while retaining the firing taxes on workers employed previous to the reform, and 3) introducing temporary contracts. The paper finds that eliminating all firing taxes increases the unemployment rate much more in the short run than in the long run, that introducing new flexible contracts has similar effects as eliminating all firing taxes, and that ...
Report
A note on labor contracts with private information and household production
A classic result in the theory of implicit contract models with asymmetric information is that ?underemployment? results if and only if leisure is an inferior good. We introduce household production into the standard implicit contract model and show that we can have underemployment at the same time that leisure is a normal good.
Journal Article
Un-COLA?
Report
Pattern bargaining
Many unions in the United States have for several years engaged in what is known as pattern bargaining?a union determines a sequence for negotiations with firms within an industry where the agreement with the first firm becomes the take-it-or-leave-it offer by the union for all subsequent negotiations. In this paper, we show that pattern bargaining is preferred by a union to both simultaneous industrywide negotiations and sequential negotiations without a pattern. In recent years, unions have increasingly moved away from patterns that equalized wage rates across firms when these patterns did ...
Journal Article
Union COLA's on the decline
Working Paper
When should labor contracts be nominal?
We propose a theory to explain the choice between nominal and indexed labor contracts. We find that contracts should be indexed if prices are difficult to forecast and nominal otherwise. Our analysis is based on a principal-agent model developed by Jovanovic and Ueda (1997) in which renegotiation can take place once the nominal value of the agent's output is observed. Their model assumes that agents use pure strategy, with the strong result that only nominal contracts can be written without being renegotiated. But, in reality, we do observe indexed contracts. We resolve this weakness of their ...