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Testing for Contracting Effects on Employment

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  • Mark Bils

Abstract

I test for the importance of wage rigidities from long-term contracts by observing how employment responds when firms and workers recontract. If rigidities are important, then employment should adjust after recontracting to partially undo its movements during the past contract. I examine twelve manufacturing industries that display a strong bargaining pattern. I find employment does rebound after recontracting, particularly in motor vehicles. This implies that contract rigidities are important. I also find responses in wage growth at the beginning of new contracts; but these responses are not related to the pattern of employment responses across industries.

Suggested Citation

  • Mark Bils, 1991. "Testing for Contracting Effects on Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1129-1156.
    • Handle: RePEc:oup:qjecon:v:106:y:1991:i:4:p:1129-1156.
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    1. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
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    Cited by:

    1. Boldrin, Michael & Horvath, Michael, 1995. "Labor Contracts and Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 972-1004, October.
    2. Ghosal, Vivek & Loungani, Prakash, 1996. "Evidence on Nominal Wage Rigidity from a Panel of U.S. Manufacturing Industries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 650-668, November.
    3. Andrew Charlton, 2003. "Nominal Wage Rigidity in The Australian Labour Market: Evidence from household Data," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 6(1), pages 25-36, March.
    4. Wallace, Frederick H, 2001. "The Effects of Shock Size and Type on Labor-Contract Duration," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 658-681, July.

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