Contracts and Commitment: Economic and Sociological Perspectives on Employment Relations

Abstract
This paper proposes a contract model of employment relations that integrates insights from economic and sociological perspectives on labor market transactions. The utility of the contract model is illustrated empirically using a large data set on organizations and their employees in U.S. and Japanese manufacturing industries. The results are consistent with many transaction cost and agency theory predictions, though they also indicate the need to supplement these economic theories with sociological explanations based on political, cultural, and other institutional differences.

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