The Spot Market Matters: Evidence on Implicit Contracts from Britain

23 Pages Posted: 5 Nov 2007

See all articles by Paul J. Devereux

Paul J. Devereux

affiliation not provided to SSRN

Robert A. Hart

University of Stirling - Department of Economics; Institute for the Study of Labor (IZA)

Date Written: 2007-08-01

Abstract

Based on the methodology of Beaudry and DiNardo (1991), this paper investigates the relative importance of the spot market and implicit contracts in the determination of British real wages. Empirical work is carried out separately for males and females with individual-level data taken from the New Earnings Survey Panel for the years 1976-2001. In contrast to previous studies that used North American data, the spot market is found to be more important than implicit contracts in determining real wages, although we do find some support for contracting effects. Further evidence is provided through the analysis of individual wage sequences. These suggest that the downwardly rigid wage sequences implied by implicit contracts with costless worker mobility are not prevalent in Britain.

Suggested Citation

Devereux, Paul J. and Hart, Robert A., The Spot Market Matters: Evidence on Implicit Contracts from Britain (2007-08-01). Scottish Journal of Political Economy, Vol. 54, Issue 5, pp. 661-683, November 2007, Available at SSRN: https://ssrn.com/abstract=1026467 or http://dx.doi.org/10.1111/j.1467-9485.2007.00435.x

Paul J. Devereux (Contact Author)

affiliation not provided to SSRN

Robert A. Hart

University of Stirling - Department of Economics ( email )

Stirling, Scotland FK9 4LA
United Kingdom
+44 1786 467 471 (Phone)
+44 1786 467 469 (Fax)

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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