Chapter 18

Great Expectations: Law, Employment Contracts, and Labor Market Performance

W. Bentley MacLeod1, Columbia University, Department of Economics, 420 West 118th, MC 3308, New York, NY 10027–7296, USA,


This chapter reviews the literature on employment and labor law. The goal of the review is to understand why every jurisdiction in the world has extensive employment law, particularly employment protection law, while most economic analysis of the law suggests that less employment protection would enhance welfare. The review has three parts. The first part discusses the structure of the common law and the evolution of employment protection law. The second part discusses the economic theory of contract. ...

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