Journal Article

Consumption Commitments and Employment Contracts

Andrew Postlewaite, Larry Samuelson and Dan Silverman

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 75, issue 2, pages 559-578
Published in print April 2008 | ISSN: 0034-6527
Published online April 2008 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2008.00472.x
Consumption Commitments and Employment Contracts

More Like This

Show all results sharing these subjects:

  • Information, Knowledge, and Uncertainy
  • Particular Labour Markets
  • Mobility, Unemployment, and Vacancies

GO

Show Summary Details

Preview

We examine an economy in which the cost of consuming some goods can be reduced by making commitments that reduce flexibility. We show that such consumption commitments can induce consumers with risk-neutral underlying utility functions to be risk averse over small variations in income, but sometimes to seek risk over large variations. As a result, optimal employment contracts will smooth wages conditional on being employed, but may incorporate a possibility of unemployment.

Keywords: D81; D86; J41; J64

Journal Article.  10226 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; Particular Labour Markets ; Mobility, Unemployment, and Vacancies

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.