Relational Contracts in Competitive Labour Markets

We analyze a large, anonymous labour market in which firms motivate their workers via relational contracts. The market is frictionless and features on-the-job search, in that all acceptable vacancies are immediately filled and the employed compete with the unemployed for vacancies. While firms and w...

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Published in:The Review of economic studies 2015-04, Vol.82 (2 (291)), p.490-534
Main Authors: BOARD, SIMON, MEYER-TER-VEHN, MORITZ
Format: Article
Language:English
Subjects:
Competition
Full employment
Labor contracts
Labor market
Labour contract
Labour market
Studies
Unemployment
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container_title The Review of economic studies
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description We analyze a large, anonymous labour market in which firms motivate their workers via relational contracts. The market is frictionless and features on-the-job search, in that all acceptable vacancies are immediately filled and the employed compete with the unemployed for vacancies. While firms and workers are ex ante identical, the unique equilibrium exhibits a continuous distribution of contracts in which high wage firms have higher retention rates, more motivated workers and higher productivity. The model thus generates dispersion in wages, productivity and human resource strategies, and gives rise to endogenous job ladders. An exogenous increase in on-the-job search increases the quantity of jobs but decreases their quality; with sufficient on-the-job search there is full employment, and wage dispersion rather than unemployment motivates workers.
doi_str_mv 10.1093/restud/rdu036
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source EconLit s plnými texty; International Bibliography of the Social Sciences (IBSS); Business Source Ultimate【Trial: -2024/12/31】【Remote access available】; JSTOR Archival Journals and Primary Sources Collection; Oxford Journals Online
subjects Competition
Full employment
Labor contracts
Labor market
Labour contract
Labour market
Studies
Unemployment
title Relational Contracts in Competitive Labour Markets
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