Contracts, hold-up and labor markets
Contracts, hold-up and labor markets
The implications for labor markets of contracts to avoid hold-up of investments are assessed. Employment at will protects the returns on a firm's general and specific investments without wages increasing with tenure. With turnover costs, fixed but renegotiable wages can protect general investments by both firm and employee, and generage wage stickiness without adversely affecting employment. Employment contracts that induce efficient specific investments by both firm and employee are problematic so it makes sense, wherever possible, for one side to make all such investments. With private information, fixed wages may induce fewer inefficient separations than employment at will.
University of Southampton
Malcomson, J.M.
575efff9-eb89-418a-beb0-c4b45957d805
January 1997
Malcomson, J.M.
575efff9-eb89-418a-beb0-c4b45957d805
Malcomson, J.M.
(1997)
Contracts, hold-up and labor markets
(Discussion Papers in Economics and Econometrics, 9703)
Southampton, UK.
University of Southampton
Record type:
Monograph
(Discussion Paper)
Abstract
The implications for labor markets of contracts to avoid hold-up of investments are assessed. Employment at will protects the returns on a firm's general and specific investments without wages increasing with tenure. With turnover costs, fixed but renegotiable wages can protect general investments by both firm and employee, and generage wage stickiness without adversely affecting employment. Employment contracts that induce efficient specific investments by both firm and employee are problematic so it makes sense, wherever possible, for one side to make all such investments. With private information, fixed wages may induce fewer inefficient separations than employment at will.
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Published date: January 1997
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Local EPrints ID: 33177
URI: http://eprints.soton.ac.uk/id/eprint/33177
PURE UUID: 81b23876-75ee-4ec3-8b4c-86852fa74264
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Date deposited: 25 Jan 2008
Last modified: 22 Jul 2022 20:40
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Author:
J.M. Malcomson
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