Working Paper: NBER ID: w2060
Authors: Russell Cooper
Abstract: This paper examines the macroeconomic properties of imperfectly competitive economies. The focus is on the coordination failures that might arise in these economies, a study of alternative policies and the comparative static properties of these models. This paper differs from others in this area by modeling the labor market from the perspective of optimal contract theory. This permits an evaluation of the role of labor market behavior in producing these coordination failures and a study of labor market policies (such as unemployment insurance and alternative compensation schemes).
Keywords: Labor Contracts; Imperfect Competition; Coordination Failures; Underemployment Equilibria; Macroeconomic Policy
JEL Codes: J41; D43; E24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Coordination failures in decentralized economies (P11) | Pareto suboptimal outcomes (D63) |
| Labor market behaviors characterized by optimal contract theory (J41) | underemployment equilibria (J64) |
| Changes in unemployment insurance (J65) | lower equilibrium activity level (D59) |
| Optimal labor contracts (J41) | correlated movements in output and employment (E24) |