Tuesday, September 24, 2013

Arthur Okun on the Invisible Handshake

I love this piece by Okun because it contains the essence of the implicit contract between a firm and its employees, yet is written in plain English so it should be readily understandable.  The underlying macroeconomic question is about "wage stickiness."  Why don't wages fall during a slump and rise in a boom?  (The do to some extent but not nearly as much standard supply and demand would predict?  Okun gives his answer vis-a-vis implicit contracts, which are a very specific type of coinsurance.  You might think of them as a certain type of quid pro quo.  We won't explicitly discuss this paper in class, but it is a very good paper to read and will give you a sense of how I think about the employment relationship.

On a technical note, if you are on the campus network you should have access to the piece.  From home you must use VPN to have access.

No comments:

Post a Comment