Technical Progress, Wages and Employment in a Contractual Economia with Incomplete Information

This paper addresses the stylized fact that individual firms, when undertaking major processes of technical innovation, appear to reduce employment and, simultaneously, to offer wage increases to the remaining workers independently of how slack is the labour market. Because this sits uncomfortably with the standard labour market stories we develop here an approach based on the theories of idiosyncratic exchange, namely the optimal contracts and the bargaining theories. The obtained results are suggestive that bargaining theories do not offer an explanation for that stylized fact but the contractual model, with incomplete information, under a set of unconventional but realistic assumptions does explain that stylized fact.N/