Delays in Renewal of Labor Contracts: Theory and Evidence

45 Pages Posted: 11 Mar 2003

See all articles by Leif Danziger

Leif Danziger

Ben-Gurion University of the Negev - Department of Economics; IZA Institute of Labor Economics

Shoshana Neuman

Bar-Ilan University - Department of Economics; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: February 2003

Abstract

In many countries, an expired labor contract is automatically extended during the often protracted delay before the new contract is signed. Our theoretical model focuses on macroeconomic factors in explaining the delay. It emphasizes the importance of the realized nominal and real shocks, and of the levels of nominal and real uncertainty. The model is tested using Israeli collective wage agreements where long delays are frequent. The empirical findings strongly support the theoretical model. Thus, nominal uncertainty is found to increase the delay, and real uncertainty to decrease the delay, but less in the public than in the private sector.

Keywords: Labor Contract, Renewal, Delay

JEL Classification: J52

Suggested Citation

Danziger, Leif and Neuman, Shoshana, Delays in Renewal of Labor Contracts: Theory and Evidence (February 2003). Available at SSRN: https://ssrn.com/abstract=385127

Leif Danziger (Contact Author)

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
8-6472295 (Phone)
8-6472941 (Fax)

HOME PAGE: http://www.econ.bgu.ac.il/facultym/danziger/main.htm

IZA Institute of Labor Economics

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

Shoshana Neuman

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972 3 531 8393 (Phone)
+972 3 535 3180 (Fax)

IZA Institute of Labor Economics

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

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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