William R. Schriver, Roger L. Bowlby, Changes in Productivity and Composition of Output in Building Construction, 1972-1982, The Review of Economics and Statistics, Vol. 67, No. 2 (May, 1985), pp. 318-322

When the assumption of constant risk premiums is relaxed, financial valuation models may be tested, and risk measures estimated without specifying a market index or state variables. This is accomplished by examining the behavior of conditional expected returns. The approach is developed using a single risk premium asset pricing model as an example and then extended to models with multiple risk premiums. The methodology is illustrated using daily return data on the common stocks of the Dow Jones 30. The tests indicate that these returns are consistent with a single, time-varying risk premium.

This paper analyzes a model in which fixed wages and layoffs may be the most efficient way to organize employment contracts. When wages fluctuate to reallocate labor among firms, workers must make costly decisions and may undertake excessive search. In contrast, if all firms reallocate labor with layoffs and new hires at fixed wages, only those workers laid off will have decisions to make. The lower decision costs of the fixed wage contract may more than compensate for the resource cost of the unemployment it causes. A novel feature of the model is the result that the socially optimal contract, when chosen by all firms, may not be the privately optimal contract.