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Title:Labour contracts, equal treatment and wage-unemployment dynamics PDF Logo
Authors:Snell, Andy
Thomas, Jonathan P.
Issue Date:2006
Series/Report no.:CESifo working paper 1835
Abstract:This paper analyses a model in which firms cannot pay discriminate based on year of entry to a firm, and develops an equilibrium model of wage dynamics and unemployment. The model is developed under the assumption of worker mobility, so that workers can costlessly quit jobs at any time. Firms on the other hand are committed to contracts. Thus the model is related to Beaudry and DiNardo (1991). We solve for the dynamics of wages and unemployment, and show that real wages do not necessarily clear the labour market. Using sectoral productivity data from the post-war US economy, we assess the ability of the model to match actual unemployment and wage series. We also show that equal treatment follows in our model from the assumption of at-will employment contracting.
JEL:E32
J41
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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