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Early contract renegotiation: An analysis of US labor contracts,1970-1995 Rich Robert

By: Contributor(s): Material type: TextTextSeries: Journal of Labor Economics ; Volume 31 , number 4,Content type:
  • text
Media type:
  • unmediated
Carrier type:
  • volume
Online resources: Summary: This article examines the ex post flexibility of US labor contracts during the 1970–95 period by investigating whether unanticipated changes in inflation increase the likelihood of a contract being renegotiated prior to its expiration. We find empirical support for this hypothesis. Specifically, our results indicate that renegotiations are triggered principally by large and infrequent price shocks of either sign. When combined with evidence that ex ante contract durations are shorter during episodes of increased inflation uncertainty, our results suggest that these contracts are flexible both ex ante and ex post to changes in the evolution of inflation.
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Item type Current library Call number Vol info Copy number Status Notes Date due Barcode
Journal Article Journal Article Main Library - Special Collections HD5706 JOU (Browse shelf(Opens below)) Vol 31, No 4.Pages 825-842 SP17577 Not for loan For in-house use only

This article examines the ex post flexibility of US labor contracts during the 1970–95 period by investigating whether unanticipated changes in inflation increase the likelihood of a contract being renegotiated prior to its expiration. We find empirical support for this hypothesis. Specifically, our results indicate that renegotiations are triggered principally by large and infrequent price shocks of either sign. When combined with evidence that ex ante contract durations are shorter during episodes of increased inflation uncertainty, our results suggest that these contracts are flexible both ex ante and ex post to changes in the evolution of inflation.

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