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| Author: | Boldrin, M. Horvath, M. |
| Title: | Labor contracts and business cycles |
| Journal: | Journal of Political Economy
1995 : OCT, VOL. 103:5, p. 972-1004 |
| Index terms: | POLITICAL ECONOMY LABOUR BUSINESS CYCLES |
| Language: | eng |
| Abstract: | This paper investigates the claim, often put forth by real business cycle proponents, that the poor performance of their models in matching real-world aggregate labour market behaviour is due to the fact that observed real wage payments do not correspond to the actual marginal productivity of labour but contain an insurance component that cannot be accounted for by the Walrasian description of the labour market and introduce contractual arrangements between employers and employees. The authors use the theory of optimal contracts to derive an equilibrium relation between aggregate states of the economy and wage-labour outcomes. |
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