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INVOLUNTARY, EMPLOYMENT IN CONTRACTS WITH RISKY JOB SEARCH
Author(s) -
BAOWN ELEANOR P.
Publication year - 1989
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1989.tb01165.x
Subject(s) - unemployment , economics , spell , attractiveness , labour economics , intuition , incentive , incentive compatibility , enforcement , microeconomics , law , psychology , economic growth , sociology , anthropology , political science , psychoanalysis , cognitive science
The implication of partially insurable job search risk for incentive compatibility in a standard contracting framework are explored. When unemployment spells provoke job search, workers face risk in spell duration and reemployment wages. When search effort is not variable, contracts including unemployment insurance will yield involuntary employment. When search effort is diminished by UI benefits, firms shift some compensation back to wages, increasing the relative attractiveness of employment. The analysis begins with a theorem on incomplete insurance by Imai, Geanakoplos and Ito [1981] for which a simple proof and economic intuition are provided.