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Contract Inefficiency, Wages and Employment: An Assessment

  • James M. Malcomson
Part of the International Economic Association Series book series (IEA)

Abstract

This chapter assesses some of the recent literature on ‘contract inefficiency’ in employment. Two main sources of potential inefficiency in labour markets have been widely discussed in the literature: (i) the process by which employee meets employer to start negotiations is inefficient; and (ii) the wage/employment/effort outcomes agreed once employer and employee (or their representatives) have started negotiating are inefficient. It is the latter to which I apply the term ‘contract inefficiency’. The former gives rise to the inefficiencies discussed in the search and matching literature. These are well surveyed in Mortensen (1986) and, although that survey is now somewhat dated, I do not attempt to update it here.

Keywords

Excess Return Reservation Wage Lifetime Utility Efficiency Wage Piece Rate 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© International Economic Association 1995

Authors and Affiliations

  • James M. Malcomson
    • 1
  1. 1.University of SouthamptonUK

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