Did American Welfare Capitalists Breach Their Implicit Contracts? Preliminary Findings from Company-Level Data, 1920-1940

40 Pages Posted: 31 Jul 2003

See all articles by Chiaki Moriguchi

Chiaki Moriguchi

Hitotsubashi University - Institute of Economic Research

Date Written: July 2003

Abstract

It has been claimed that American employers' experiments in private welfare capitalism collapsed during the Great Depression and were subsequently replaced by the welfare state and industrial unionism. However, recent studies reveal considerable differences among firms, adding complex nuances to a simple story of discontinuation. Characterizing private welfare capitalism as a set of personnel practices that constituted an implicit contract equilibrium, this paper compiles data of fourteen manufacturing firms and tests the implications of implicit contract theory. It finds that the repudiation of implicit contracts was positively correlated with the severity of the depression experienced by a firm and negatively correlated with the effectiveness of internal enforcement mechanisms. It also shows that a firm with more repudiation experienced greater change in labor-management relations under the New Deal regime. A comparative case study complements the findings by providing quantitative evidence.

Suggested Citation

Moriguchi, Chiaki, Did American Welfare Capitalists Breach Their Implicit Contracts? Preliminary Findings from Company-Level Data, 1920-1940 (July 2003). NBER Working Paper No. w9868. Available at SSRN: https://ssrn.com/abstract=428362

Chiaki Moriguchi (Contact Author)

Hitotsubashi University - Institute of Economic Research ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8306
Japan

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