Can Relational Contracts Survive Stochastic Interruptions? Experimental Evidence
نویسندگان
چکیده
This paper tests the robustness of the “two-tiered labor market” in which efficient bilateral contracts emerge between firms and workers (Brown, Falk and Fehr, 2004). Our experiment introduces stochastic interruptions in firm’s ability to offer contracts. Involuntarily laid off workers are eager to be reemployed; they are unselective about job offers and do not shirk. Firm’s preference for these “temp workers” induces all workers to compete harder to enter relational contracts. Wages in low-tier markets rise dramatically, suggesting that the stigma of unemployment is removed. The results show that interruptions may shorten relational contracts without harming market efficiency. JEL classification numbers: C9, D82, E24, J3, J41
منابع مشابه
Can Relational Contracts Survive Stochastic Interruptions?
This paper investigates the robustness of the “two-tiered labor market” experimental results of Brown, Falk and Fehr (2004) by subjecting relationships to stochastic interruptions. Using two different subject pools, we first replicate the basic pattern of high quality private contracting and low quality public contracting. We then study the impact of exogenous random ‘downturns’ in which firms ...
متن کاملDivision of the Humanities and Social Sciences California Institute of Technology Pasadena, California 91125 Can Relational Contracts Survive Stochastic Interruptions?
This paper investigates the robustness of the “two-tiered labor market” experimental results of Brown, Falk and Fehr (2004) by subjecting relationships to stochastic interruptions. Using two different subject pools, we first replicate the basic pattern of high quality private contracting and low quality public contracting. We then study the impact of exogenous random ‘downturns’ in which firms ...
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