Unemployment with Observable Aggregate Shocks

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Unemployment with Observable Aggregate Shocks

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Title: Unemployment with Observable Aggregate Shocks
Author: Grossman, Sanford J.; Hart, Oliver D.; Maskin, Eric S.

Note: Order does not necessarily reflect citation order of authors.

Citation: Grossman, Sanford J., Oliver D. Hart, Eric S. Maskin. 1983. Unemployment with observable aggregate shocks. Journal of Political Economy 91(6): 907-928.
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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.
Published Version: doi:10.1086/261193
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3448840
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