IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/7731.html
   My bibliography  Save this paper

Uncertainty and Labor Contract Durations

Author

Listed:
  • Robert Rich
  • Joseph Tracy

Abstract

This paper provides an empirical investigation into the relationship between ex ante U.S. labor contract durations and uncertainty over the period 1970 to 1995. We construct measures of inflation uncertainty as well as aggregate nominal and real uncertainty. The results not only corroborate previous findings of an inverse relationship between contract duration and inflation uncertainty, but document that this relationship extends to both measures of aggregate uncertainty. We also explore the robustness of this relationship to the various measures of inflation uncertainty that have appeared in the literature.

Suggested Citation

  • Robert Rich & Joseph Tracy, 2000. "Uncertainty and Labor Contract Durations," NBER Working Papers 7731, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7731
    Note: LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w7731.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Kevin J. Murphy, 1992. "Determinants of Contract Duration in Collective Bargaining Agreements," ILR Review, Cornell University, ILR School, vol. 45(2), pages 352-365, January.
    3. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
    4. Cousineau, Jean-Michel & Lacroix, Robert & Bilodeau, Danielle, 1983. "The Determination of Escalator Clauses in Collective Agreements," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 196-202, May.
    5. Peter Cramton & Morley Gunderson & Joseph Tracy, 1999. "The Effect Of Collective Bargaining Legislation On Strikes And Wages," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 475-487, August.
    6. 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.
    7. Rich, R W & Raymond, J E & Butler, J S, 1992. "The Relationship between Forecast Dispersion and Forecast Uncertainty: Evidence from a Survey Data-ARCH Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(2), pages 131-148, April-Jun.
    8. A. R. Pagan & A. D. Hall & P. K. Trivedi, 1983. "Assessing the Variability of Inflation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(4), pages 585-596.
    9. Victor Zarnowitz & Louis A. Lambros, 1983. "Consensus and Uncertainty in Economic Prediction," NBER Working Papers 1171, National Bureau of Economic Research, Inc.
    10. Mullineaux, Donald J, 1980. "Unemployment, Industrial Production, and Inflation Uncertainty in the United States," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 163-169, May.
    11. Schnell, John F & Gramm, Cynthia L, 1987. "Learning by Striking: Estimates of the Teetotaler Effect," Journal of Labor Economics, University of Chicago Press, vol. 5(2), pages 221-241, April.
    12. Holland, A Steven, 1986. "Wage Indexation and the Effect of Inflation Uncertainty on Employment:An Empirical Analysis," American Economic Review, American Economic Association, vol. 76(1), pages 235-243, March.
    13. Card, David, 1986. "An Empirical Model of Wage Indexation Provisions in Union Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 144-175, June.
    14. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-959, July.
    15. repec:nbr:nberre:0126 is not listed on IDEAS
    16. Vroman, Susan B, 1989. "Inflation Uncertainty and Contract Duration," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 677-681, November.
    17. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    18. Christofides, Louis N, 1985. "The Impact of Controls on Wage Contract Duration," Economic Journal, Royal Economic Society, vol. 95(377), pages 161-168, March.
    19. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    20. Cukierman, Alex & Wachtel, Paul, 1979. "Differential Inflationary Expectations and the Variability of the Rate of Inflation: Theory and Evidence," American Economic Review, American Economic Association, vol. 69(4), pages 595-609, September.
    21. Leaf Danziger, 1988. "Real Shocks, Efficient Risk Sharing, and the Duration of Labor Contracts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(2), pages 435-440.
    22. Wallace E. Hendricks & Lawrence M. Kahn, 1983. "Cost-of-Living Clauses in Union Contracts: Determinants and Effects," ILR Review, Cornell University, ILR School, vol. 36(3), pages 447-460, April.
    23. Benjamin M. Friedman & Kenneth N. Kuttner, 1996. "A Price Target for U.S. Monetary Policy? Lessons from the Experience with Money Growth Targets," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 77-146.
    24. Jordi Galí, 1992. "How Well Does The IS-LM Model Fit Postwar U. S. Data?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 709-738.
    25. Ronald G. Ehrenberg & Leif Danziger & Gee San, 1982. "Cost-of-Living Adjustment Clauses in Union Contracts," NBER Working Papers 0998, National Bureau of Economic Research, Inc.
    26. Levi, Maurice D & Makin, John H, 1980. "Inflation Uncertainty and the Phillips Curve: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 70(5), pages 1022-1027, December.
    27. Canzoneri, Matthew B., 1980. "Labor contracts and monetary policy," Journal of Monetary Economics, Elsevier, vol. 6(2), pages 241-255, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christofides, Louis N. & Peng, Chen, 2006. "Contract duration and indexation in a period of real and nominal uncertainty," Labour Economics, Elsevier, vol. 13(1), pages 61-86, February.
    2. Louis Christofides & Chen Peng, 2006. "Major Provisions of Labour Contracts and their Theoretical Coherence," CESifo Working Paper Series 1700, CESifo.
    3. Rich, R W & Raymond, J E & Butler, J S, 1992. "The Relationship between Forecast Dispersion and Forecast Uncertainty: Evidence from a Survey Data-ARCH Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(2), pages 131-148, April-Jun.
    4. Hsuan-Yu Lin & Chih-Hai Yang, 2016. "Uncertainty, specific investment, and contract duration: evidence from the MLB player market," Empirical Economics, Springer, vol. 50(3), pages 1009-1028, May.
    5. Robert W. Rich & Joseph Tracy, 2011. "Early contract renegotiation: An analysis of U.S. labor contracts from 1970 to 1995," Staff Reports 521, Federal Reserve Bank of New York.
    6. Robert Rich & Joseph Tracy, 2013. "Early Contract Renegotiation: An Analysis of US Labor Contracts, 1970-1995," Journal of Labor Economics, University of Chicago Press, vol. 31(4), pages 825-842.
    7. 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.
    8. Danziger, Leif, 2008. "Extension of labor contracts and optimal backpay," Labour Economics, Elsevier, vol. 15(1), pages 18-36, February.
    9. Post, Thomas & Hanewald, Katja, 2013. "Longevity risk, subjective survival expectations, and individual saving behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 200-220.
    10. repec:hum:wpaper:sfb649dp2010-040 is not listed on IDEAS
    11. Leif Danziger & Shoshana Neuman, 2005. "Delays in Renewal of Labor Contracts: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 23(2), pages 341-372, April.
    12. James F. Ragan & Bernt Bratsberg, 2000. "Un‐COLA: Why Have Cost‐of‐Living Clauses Disappeared from Union Contracts and Will They Return?," Southern Economic Journal, John Wiley & Sons, vol. 67(2), pages 304-324, October.
    13. Murphy, Kevin J., 2000. "What effect does uncertainty have on the length of labor contracts?," Labour Economics, Elsevier, vol. 7(2), pages 181-201, March.
    14. Giordani, Paolo & Soderlind, Paul, 2003. "Inflation forecast uncertainty," European Economic Review, Elsevier, vol. 47(6), pages 1037-1059, December.
    15. Kanago, Bryce, 1998. "The Relation between Contract Duration and Inflation Uncertainty: Further Evidence," Journal of Macroeconomics, Elsevier, vol. 20(4), pages 811-819, October.
    16. Andrade, Isabel, 1992. "The relationship between inflation and relative price variability: A multivariate approach," Discussion Paper Series In Economics And Econometrics 9203, Economics Division, School of Social Sciences, University of Southampton.
    17. Post, Thomas & Hanewald, Katja, 2010. "Stochastic mortality, subjective survival expectations, and individual saving behavior," SFB 649 Discussion Papers 2010-040, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    18. Nir Klein, 2004. "Long-Term Contracts as a Strategic Device," Bank of Israel Working Papers 2004.16, Bank of Israel.
    19. Froyen, Richard T & Waud, Roger N, 1988. "Real Business Cycles and the Lucas Paradigm," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 183-201, April.
    20. Engelberg, Joseph & Manski, Charles F. & Williams, Jared, 2009. "Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters," Journal of Business & Economic Statistics, American Statistical Association, vol. 27, pages 30-41.
    21. A. Steven Holland, 1984. "Does higher inflation lead to more uncertain inflation?," Review, Federal Reserve Bank of St. Louis, vol. 66(Feb), pages 15-26.

    More about this item

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:7731. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.