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Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 177 Descrição:
"Nominal labor contracts replicate net of tax real contracts contingent on aggregate risk in the model presented. Perhaps this is a model of money." (title page note)
Palavra-chave: Wages, Income tax, Labor economics, and Inflation tax Sujeito: C68 - Computable General Equilibrium Models and J41 - Labor Contracts
Creator: Martin, Antoine and Monnet, Cyril Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 603 Abstract:
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 certain parameters, the optimal contract is still nominal. For other parameters, however, we show that the optimal contract is indexed. Our findings are consistent with two empirical regularities. First prices are more volatile with higher inflation and, second, countries with high inflation tend to have indexed contracts. Our theory suggests that it is because prices are difficult to forecast in high inflation countries that contracts are indexed.
Palavra-chave: Theory of uncertainty and information and Nominal contracts Sujeito: E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data), J40 - Particular Labor Markets: General, and D80 - Information, Knowledge, and Uncertainty: General
Creator: Chari, V. V., Jones, Larry E., and Manuelli, Rodolfo E. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 117 Abstract:
We propose a definition of involuntary unemployment which differs from that traditionally used in implicit labor contract theory. We say that a worker is involuntarily unemployed if the marginal wage implied by the optimal contract exceeds the marginal rate of substitution between leisure and consumption. We construct a model where risk-neutral firms have monopoly power and show that such monopoly power is necessary for involuntary unemployment to arise in the optimal contract. We numerically compute examples and show that such unemployment occurs for a wide range of parameter values.
Creator: Nosal, Ed, Rogerson, Richard Donald, and Wright, Randall D. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 131 Abstract:
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.
Creator: Bryant, John B. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 047 Abstract:
Long-term contracts are explained as equilibrium strategies of supergames. In the specific coherent general equilibrium model provided, limited mobility of labor, in the form of a fixed cost of moving, generates long-term contracts.
Creator: Smith, Bruce D. (Bruce David), 1954-2002 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 232 Abstract:
A model of a "real" business cycle is produced in which labor market participants possess private information. A class of economies is considered in which interesting cycles cannot arise without private information. A methodology adapted from Kydland and Prescott (1982) is then employed to show that models based on private information can empirically confront salient features of postwar U.S. business cycles. Moreover, this can be done in a way which is consistent with existing microeconomic evidence on wages and labor supply. Finally, it is shown that the important features of the model related to private information are fairly general.
Palavra-chave: Assymetric information, Labor markets, Labor contracts, and Unemployment Sujeito: D82 - Asymmetric and Private Information; Mechanism Design and E32 - Business Fluctuations; Cycles
Creator: Ray, Debraj. and Streufert, Peter A. Series: Models of economic growth and development Abstract:
We incorporate the consumption-ability relationship of static "efficiency wage" models into a dynamic general equilibrium model. We show that for many aggregate land stocks, there is a continuum of unemployment rates which could persist indefinitely as part of a stationary equilibrium. For many of these aggregate land stocks, both unemployment and full employment are distrinct possibilities. Broadly speaking, more unemployment corresponds to more undernourishment and more inequality in land distribution. Thus our results suggest that the market mechanism is less efficacious than land reform in reducing unemployment and undernourishment.
Sujeito: J41 - Particular labor markets - Labor contracts, F41 - Macroeconomic aspects of international trade and finance - Open economy macroeconomics, and O42 - Economic growth and aggregate productivity - Monetary growth models
Creator: Camargo, Braz and Pastorino, Elena Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 475 Abstract:
We analyze commitment to employment in an environment in which an infinitely lived firm faces a sequence of finitely lived workers who differ in their ability to produce output. A worker’s ability is initially unknown to both the worker and the firm. A worker’s effort affects the information on ability conveyed by his performance. We characterize equilibria and show that they display commitment to employment only when effort has a persistent but delayed impact on output. In this case, by providing insurance against early termination, commitment to employment encourages workers to exert effort, thus improving the firm’s ability to identify workers’ talent. The incentive value of commitment to retention helps explain the use of probationary appointments in environments in which there is uncertainty about individual ability.
Palavra-chave: Commitment, Learning, Career concerns, and Retention Sujeito: D21 - Firm Behavior: Theory, C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games, D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness, and J41 - Labor Contracts
Creator: Shell, Karl and Wright, Randall D. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 133 Abstract:
We analyze economies with indivisible commodities. There are two reasons for doing so. First, we extend and provide new insights into sunspot equilibrium theory. Finite competitive economies with perfect markets and convex consumption sets do not allow sunspot equilibria; these same economies with nonconvex consumption sets do, and they have several properties that can never arise in convex environments. Second, we provide a reinterpretation of the employment lotteries used in contract theory and in macroeconomic models with indivisible labor. We show how socially optimal employment lotteries can be decentralized as competitive equilibria once sunspots are introduced.
Palavra-chave: Economic theory, Competitive equilibrium, Macroeconomic model , Contract theory, and Equilibrium theory