The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Implicit Contracts

  • Costas Azariadis
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1180

Abstract

An implicit contract is a theoretical construct meant to describe complex agreements, written and tacit, between employers and employees, which govern the exchange of labour services when various types of job-specific investments inhibit labour mobility and opportunities to shed risk are limited by imperfectly developed markets for contingent claims. This construct differs from the more familiar one of a neoclassical labour exchange in emphasizing a trading process, frequently over a long period of time, between two specific economic units (say a worker and a firm, union and management, and so on) rather than the impersonal, and often instantaneous, market process in which wages decentralize and coordinate the actions of labour suppliers and labour demanders.

JEL Classifications

J41 
This is a preview of subscription content, log in to check access.

Bibliography

  1. Azariadis, C. 1975. Implicit contracts and underemployment equilibria. Journal of Political Economy 83: 1183–1202.CrossRefGoogle Scholar
  2. Azariadis, C. 1983. Employment with asymmetric information. Quarterly Journal of Economics 98 (Supplement): 157–172.CrossRefGoogle Scholar
  3. Azariadis, C., and R. Cooper. 1985. Nominal wage-price rigidity as a rational expectations equilibrium. American Economic Review, Papers and Proceedings 75: 31–35.Google Scholar
  4. Baily, M. 1974. Wages and employment under uncertain demand. Review of Economic Studies 41: 37–50.CrossRefGoogle Scholar
  5. Becker, G. 1964. Human capital. New York: Columbia University Press.Google Scholar
  6. Bénassy, J.-P. 1975. Neo-Keynesian disequilibrium in a monetary economy. Review of Economic Studies 42: 502–523.CrossRefGoogle Scholar
  7. Bull, C. 1986. The existence of self-enforcing implicit contracts. Quarterly Journal of Economics.Google Scholar
  8. Clower, R. 1965. The Keynesian counter-revolution: A theoretical appraisal. In The theory of interest rates, ed. F. Hahn and F. Brechling. London: Macmillan.Google Scholar
  9. Cooper, R. 1983. A note on overemployment/underemployment in labor contracts under asymmetric information. Economics Letters 12: 81–87.CrossRefGoogle Scholar
  10. Drèze, J. 1975. Existence of an equilibrium under price rigidity and quantity rationing. International Economic Review 16: 301–320.CrossRefGoogle Scholar
  11. Farmer, R. 1984. A new theory of aggregate supply. American Economic Review 74: 920–930.Google Scholar
  12. Feldstein, M. 1975. The importance of temporary layoffs: An empirical analysis. Brookings Papers on Economic Activity 3: 725–744.CrossRefGoogle Scholar
  13. Gordon, D.F. 1974. A neoclassical theory of Keynesian unemployment. Economic Inquiry 12: 431–449.CrossRefGoogle Scholar
  14. Grossman, S., and O. Hart. 1981. Implicit contracts, moral hazard and unemployment. American Economic Review, Papers and Proceedings 71: 301–307.Google Scholar
  15. Hall, R. 1980. Employment fluctuations and wage rigidity. Brookings Papers on Economic Activity 1: 91–124.CrossRefGoogle Scholar
  16. Hall, R. 1982. The importance of lifetime jobs in the US economy. American Economic Review, Papers and Proceedings 72: 716–724.Google Scholar
  17. Hall, R., and D. Lilien. 1979. Efficient wage bargains under uncertain supply and demand. American Economic Review 69: 868–879.Google Scholar
  18. Hart, O. 1983. Optimal labour contracts under asymmetric information: An introduction. Review of Economic Studies 50: 3–35.CrossRefGoogle Scholar
  19. Hӧlmstrom, B. 1983. Equilibrium long-term labor contracts. Quarterly Journal of Economics 98 (Supplement): 23–54.CrossRefGoogle Scholar
  20. Knight, F. 1921. Risk, uncertainty and profit. Boston: Houghton Mifflin.Google Scholar
  21. Kydland, F., and E. Prescott. 1982. Time to build and aggregate fluctuations. Econometrica 50: 1345–1370.CrossRefGoogle Scholar
  22. Lucas, R., and L. Rapping. 1969. Real wages, employment and inflation. Journal of Political Economy 77: 721–754.CrossRefGoogle Scholar
  23. Neftci, S. 1978. A time-series analysis of the real wages–employment relationship. Journal of Political Economy 86: 281–291.CrossRefGoogle Scholar
  24. Radner, R. 1981. Monitoring cooperative agreements in a repeated principal–agent relationship. Econometrica 49: 1127–1148.CrossRefGoogle Scholar
  25. Rosen, S. 1985. Implicit contracts: A survey. Journal of Economic Literature 23: 1144–1175.Google Scholar
  26. Smith, A. 1776. The wealth of nations, 1970. London: Pelican Books.Google Scholar
  27. Townsend, R. 1982. Optimal multiperiod contracts and the gain from enduring relationships under private information. Journal of Political Economy 90: 1166–1186.CrossRefGoogle Scholar
  28. Williamson, O. 1979. Transaction-cost economics: The governance of contractual relations. Journal of Law and Economics 22: 233–261.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Costas Azariadis
    • 1
  1. 1.