Labor Contracts and Risk Sharing
This paper analyzes the rationale and limits of using labor contracts as a risk-sharing mechanism by (1) discussing types of contracts and their characteristics; (2) deriving the optimal labor contract for risk-neutral firms and risk-averse workers; (3) contrasting the predictions of contract labor...
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World Bank, Washington, DC
2013
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| Online Access: | http://hdl.handle.net/10986/16325 |
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okr-10986-163252021-04-23T14:03:28Z Labor Contracts and Risk Sharing Gutierrez, Federico H. This paper analyzes the rationale and limits of using labor contracts as a risk-sharing mechanism by (1) discussing types of contracts and their characteristics; (2) deriving the optimal labor contract for risk-neutral firms and risk-averse workers; (3) contrasting the predictions of contract labor and spot labor markets; (4) discussing the limits of labor contracts as a mechanisms to allocate risks; (5) focusing on rural labor markets, where labor and land contracts provide substitutes and have implication in relation to risk allocation; (6) discussing government interventions; and (7) reviewing the empirical evidence with special emphasis on Mexico. Labor contracts remain a mechanism to allocate risks between employers and employees, and a contract equilibrium may dominate a spot labor market equilibrium. However, limits associated with costly enforcement of contracts and problems of adverse selection exist. The evidence suggests that firms offer contracts that provide insurance against both aggregate shocks and idiosyncratic productivity shocks. 2013-11-27T18:57:05Z 2013-11-27T18:57:05Z 2013-05 http://hdl.handle.net/10986/16325 en_US CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Mexico |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
en_US |
| geographic_facet |
Mexico |
| description |
This paper analyzes the rationale and limits of using labor contracts as a risk-sharing mechanism by (1) discussing types of contracts and their characteristics; (2) deriving the optimal labor contract for risk-neutral firms and risk-averse workers; (3) contrasting the predictions of contract labor and spot labor markets; (4) discussing the limits of labor contracts as a mechanisms to allocate risks; (5) focusing on rural labor markets, where labor and land contracts provide substitutes and have implication in relation to risk allocation; (6) discussing government interventions; and (7) reviewing the empirical evidence with special emphasis on Mexico. Labor contracts remain a mechanism to allocate risks between employers and employees, and a contract equilibrium may dominate a spot labor market equilibrium. However, limits associated with costly enforcement of contracts and problems of adverse selection exist. The evidence suggests that firms offer contracts that provide insurance against both aggregate shocks and idiosyncratic productivity shocks. |
| author |
Gutierrez, Federico H. |
| spellingShingle |
Gutierrez, Federico H. Labor Contracts and Risk Sharing |
| author_facet |
Gutierrez, Federico H. |
| author_sort |
Gutierrez, Federico H. |
| title |
Labor Contracts and Risk Sharing |
| title_short |
Labor Contracts and Risk Sharing |
| title_full |
Labor Contracts and Risk Sharing |
| title_fullStr |
Labor Contracts and Risk Sharing |
| title_full_unstemmed |
Labor Contracts and Risk Sharing |
| title_sort |
labor contracts and risk sharing |
| publisher |
World Bank, Washington, DC |
| publishDate |
2013 |
| url |
http://hdl.handle.net/10986/16325 |
| _version_ |
1764432852873641984 |