Workers’ behavior and labor contract: An evolutionary approach

Abstract

This paper investigates the co-evolution of labor relationships and workers’ preferences. The workforce is composed by cooperative and non-cooperative workers, while firms offer either explicit or implicit contracts. Both the distribution of preferences and the nature of labor contract are endogenized: firms invest in corporate culture in order to change workers’ preferences and the proportion of each type of contract is driven by an evolutionary process. The complementarity between the transmission of cooperation and the implementation of implicit contracts leads to multiple equilibria and path dependence phenomenon. This property is illustrated by historical evolutions of American and Japanese labor contracts. © 2009 Blackwell Publishing Ltd.