This paper aims to extend an implicit labor contract model allowing for the ex-post interfirm mobility of the workers within a general equilibrium framework. Our main concern is with investigation of the qualitative properties of the model such as stability.
The structure of the model will be briefly sketched out as follows:
(1) In each temporary equilibrium, it is supposed that the distributive bargaining on the organizational rent accruing from the resulting implicit labor contracts is specified with the given available labor pool as a two-person cooperative game due to Zeuthen, Nash and Harsanyi.
(2) After these contracts have been realized in each temporary equilibrium, workers can gradually move into the labor pool of another firm when they can enjoy higher expected utility level by doing so.
(3) As a result of the expansion or contraction of the labor pool associated with a firm, another temporary equilibrium will be established relative to a new array of labor allocation.
(4) A sequence of temporary equilibria will continue until workers can enjoy the same expected utility level irrespective of firm. The stationary equilibrium will be attained by the final outcome of such a sequence.
Our main results may be summarized by the following: The implicit labor contracts system has its organizational stability in the sense that the stationary equilibrium is globally stable. This conclusion suggests that the employment system of the implicit labor contracts is maintained as a stable one within the general equilibrium framework.
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