Journal of Labor Economics Vol. 7 No. 2 1989
Incentive-Compatible Long-Term Contracts and Job Rationing
Abstract
This article presents a model in which markets for long-term contractual employment coexist with spot markets for labor. Assuming the absence of third-party enforcement, wage contracts are required to be incentive compatible. As a consequence, contract wages yield higher expected utility to the worker than spot-market wages so that, in equilibrium, contractual long-term jobs are rationed.
- DOI
- 10.1086/298207
- Volume
- 7
- Issue
- 2
- Pages
- 238-255
- Language
- en
- Sources
- openalex crossref