Publication: Unemployment with Observable Aggregate Shocks
Open/View Files
Date
1983
Published Version
Journal Title
Journal ISSN
Volume Title
Publisher
University of Chicago Press
The Harvard community has made this article openly available. Please share how this access benefits you.
Citation
Grossman, Sanford J., Oliver D. Hart, Eric S. Maskin. 1983. Unemployment with observable aggregate shocks. Journal of Political Economy 91(6): 907-928.
Research Data
Abstract
A general equilibrium model of' optimal employment contracts is developed where firms have better information about labor's marginal product than workers. It is optimal for the wage to be tied to the level of employment, to prevent the firm from falsely stating that the marginal product is low and cutting the wage. It is shown that an observed aggregate shock that leads to an interindustry shift in labor demand and that would have no effect on total employment under symmetric information leads to a reduction in employment when firms and workers have asymmetric information.
Description
Other Available Sources
Keywords
Terms of Use
This article is made available under the terms and conditions applicable to Other Posted Material (LAA), as set forth at Terms of Service