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http://hdl.handle.net/10419/36857
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| Title: | | Implicit contracts, unemployment, and labor market segmentation  |
| Authors: | | Altmann, Steffen Falk, Armin Huffman, David |
| Issue Date: | | 2010 |
| Series/Report no.: | | Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5001 |
| Abstract: | | We analyze the impact of imperfect contract enforcement on the emergence of unemployment. In an experimental labor market where trading parties can form long-term employment relationships, we compare a work environment where effort is observable, but not verifiable to a situation where explicit contracts are feasible. Our main result shows that unemployment is much higher when third-party contract enforcement is absent. Unemployment is involuntary, being caused by firms' employment and contracting policy. Moreover, we show that implicit contracting can lead to a segmentation of the labor market. Firms in both segments earn similar profits, but workers in the secondary sector face much less favorable conditions than their counterparts in primary-sector jobs. |
| Subjects: | | Incentives implicit contracts unemployment fairness dual labor markets |
| JEL: | | C92 J64 M55 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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