Contracting Productivity Growth

P. Francois, J. Roberts

Research output: Working paperDiscussion paperOther research output

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Abstract

In this paper, we analyze the interactions between growth and the contracting environment in the production sector.Allowing incompleteness in contracting implies that viable production relationships for firms and workers, and therefore the profitability of industries, depend on the rates of innovation and growth.The speed at which new innovations arrive in turn depends on the profitability of production, for the usual reasons examined in the endogenous growth literature.We show that these interactions can have important implications which are consistent with observed phenomena in both the micro and macro environment.In particular, we demonstrate that a technological shock (increasing productivity of research) can, through this interaction, lead to a productivity slowdown and a shift in labor market contracts away from firms providing implicit guarantees of lifetime employment and towards shorter-term "contractor" type arrangements.We show the consistency of an increase in the proportion of the labor force under short term employment, increased relative returns of workers in high productivity sectors, and increased income inequality, with a productivity slowdown of finite duration.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages50
Volume2001-35
Publication statusPublished - 2001

Publication series

NameCentER Discussion Paper
Volume2001-35

Fingerprint

Productivity growth
Contracting
Interaction
Productivity
Workers
Profitability
Innovation
Productivity slowdown
Industry
Endogenous growth
Contractors
Labor force
Lifetime employment
Incompleteness
Proportion
Income inequality
Labour market
Guarantee

Keywords

  • economic growth
  • contracts
  • productivity

Cite this

Francois, P., & Roberts, J. (2001). Contracting Productivity Growth. (CentER Discussion Paper; Vol. 2001-35). Tilburg: Macroeconomics.
Francois, P. ; Roberts, J. / Contracting Productivity Growth. Tilburg : Macroeconomics, 2001. (CentER Discussion Paper).
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Francois, P & Roberts, J 2001 'Contracting Productivity Growth' CentER Discussion Paper, vol. 2001-35, Macroeconomics, Tilburg.

Contracting Productivity Growth. / Francois, P.; Roberts, J.

Tilburg : Macroeconomics, 2001. (CentER Discussion Paper; Vol. 2001-35).

Research output: Working paperDiscussion paperOther research output

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AB - In this paper, we analyze the interactions between growth and the contracting environment in the production sector.Allowing incompleteness in contracting implies that viable production relationships for firms and workers, and therefore the profitability of industries, depend on the rates of innovation and growth.The speed at which new innovations arrive in turn depends on the profitability of production, for the usual reasons examined in the endogenous growth literature.We show that these interactions can have important implications which are consistent with observed phenomena in both the micro and macro environment.In particular, we demonstrate that a technological shock (increasing productivity of research) can, through this interaction, lead to a productivity slowdown and a shift in labor market contracts away from firms providing implicit guarantees of lifetime employment and towards shorter-term "contractor" type arrangements.We show the consistency of an increase in the proportion of the labor force under short term employment, increased relative returns of workers in high productivity sectors, and increased income inequality, with a productivity slowdown of finite duration.

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Francois P, Roberts J. Contracting Productivity Growth. Tilburg: Macroeconomics. 2001. (CentER Discussion Paper).