TY  - RPRT
        AU  - Altmann, Steffen
AU  - Falk, Armin
AU  - Huffman, David B.
        TI  - Implicit Contracts, Unemployment, and Labor Market Segmentation
        PY  - 2010/Jun/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 5001
        UR  - https://www.iza.org/publications/dp5001
        AB  - We analyze the impact of imperfect contract enforcement on the emergence of unemployment. In an experimental labor market where trading parties can form long-term employment relationships, we compare a work environment where effort is observable, but not verifiable to a situation where explicit contracts are feasible. Our main result shows that unemployment is much higher when third-party contract enforcement is absent. Unemployment is involuntary, being caused by firms' employment and contracting policy. Moreover, we show that implicit contracting can lead to a segmentation of the labor market. Firms in both segments earn similar profits, but workers in the secondary sector face much less favorable conditions than their counterparts in primary-sector jobs.
        KW  - incentives
KW  - fairness
KW  - unemployment
KW  - dual labor markets
KW  - implicit contracts
        ER  -