Implicit Contracts and Underemployment Equilibria

  title={Implicit Contracts and Underemployment Equilibria},
  author={Costas Azariadis},
  journal={Journal of Political Economy},
  pages={1183 - 1202}
This paper studies an industry with demand uncertainty which prompts risk-neutral firms to act both as employers and as insurers of homogeneous, risk-averse laborers. The resulting contractual arrangements turn out, in their simplest form, to be more likely to specify full employment the more of the following conditions prevail: small variability in product price, above-average economy-wide labor demand, highly risk-averse workers, small unemployment compensation, and highly competitive product… 
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