American Economic Review Vol. 78 No. 5 1988
Implicit Contracts, Labor Mobility, and Unemployment
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.
- Volume
- 78
- Issue
- 5
- Pages
- 1046-1066
- Sources
- bibtex:phds-export.bib