Title

Efficient Contracts and Cost of Adjustment: Short-Run Employment Determination for Airline Mechanics

Author(s)

David E. Card David Card (Princeton University)

Abstract

This paper presents an empirical analysis of short-run employment determination for mechanics employed at seven domestic airline firms during the period 1969-1976. The link between output, contractual wage rates, aggregate wage rates and employment is explored in the framework of a model that permits costly adjustment and potential discrepancies between contractual wage rates and the opportunity value of workers' time. The estimation results confirm that simple partial adjustment employment models provide a useful description of the output-employment relationship. These models are less successful, however, in describing the effects of wages on firm-specific employment outcomes. There is some evidence against both a standard labor demand curve characterization of employment, and a simple efficient contracts characterization that equates the marginal product of labor to the alternative wage rate available to employees.

Creation Date

1984-11

Section URL ID

IRS

Paper Number

180

URL

https://dataspace.princeton.edu/bitstream/88435/dsp015t34sj583/1/180.pdf

File Function

Jel

C71

Keyword(s)

Suppress

false

Series

1