Document Type
Article
Publication Date
6-24-2005
Abstract
In this paper, I analyze three types of labor market relationships that are prevalent in the economy - the external labor market that exists outside of firms, and the union and nonunion employment relationships that exist inside firms. The parties' relationships in each of these markets are markedly different from one another with respect to their use of contracts versus norms, their enforcement mechanisms, and their reliance on external competitive market pressures. Why do these very distinct forms exist? This paper provides an answer to this question. To be successful, each of the structures has to resolve problems of match-specific assets, asymmetric information, risk aversion, and transaction costs. The paper describes how the terms of the different labor market relationships work to protect the parties' agreements and the extent to which the terms of the agreement can be interpreted as maximizing joint profit. Finally, I address whether the very different enforcement protections are adequate.
Keywords
Labor Market, Contracting, Union versus Non Union, Contracts versus Norms, Enforcement Mechanisms
Publication Title
Theoretical Perspectives on Work and the Employment Relationship
Repository Citation
Wachter, Michael L., "Theories of the Employment Relationship: Choosing between Norms and Contracts" (2005). All Faculty Scholarship. 66.
https://scholarship.law.upenn.edu/faculty_scholarship/66
Included in
Human Resources Management Commons, Labor and Employment Law Commons, Labor Economics Commons, Labor Relations Commons
Publication Citation
In Theoretical Perspectives on Work and the Employment Relationship (Bruce E. Kaufman ed., Industrial Relations Research Association 2004)