Labor Contracts and Risk Sharing
This paper analyzes the rationale and limits of using labor contracts as a risk-sharing mechanism by (1) discussing types of contracts and their characteristics; (2) deriving the optimal labor contract for risk-neutral firms and risk-averse workers; (3) contrasting the predictions of contract labor and spot labor markets; (4) discussing the limits of labor contracts as a mechanisms to allocate risks; (5) focusing on rural labor markets, where labor and land contracts provide substitutes and have implication in relation to risk allocation; (6) discussing government interventions; and (7) rev