Skip to main content
SpringerLink
Log in

The employment contract: A test of the transaction cost theory

  • Articles
  • Published:
Sociological Forum

Abstract

This paper tests some predictions derived from Williamson's “transaction cost” theory of the organization of work, which holds that the form of the employment relationship is determined largely by the “idiosyncrasy” of work—that is, the nature of skills and knowledge used in production. It examines the occurrence of theoretically relevant provisions in collective bargaining agreements in the United States and finds they are related to a contract-level proxy for idiosyncrasy (based on bargaining structure) as predicted by the theory. An analysis of an individual-level variable, the difficulty of finding a comparable job, provides some additional support. Finally, several alternative explanations of the results are considered, and it is argued that none are consistent with the evidence. The analysis thus finds strong, if necessarily provisional, support for the theory.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Baron, James N., Alison Davis-Blake, andWilliam T. Bielby 1986 “The structure of opportunity.” Administrative Science Quarterly 31:248–273.

    Google Scholar 

  • Blauner, Robert 1964 Alienation and Freedom. Chicago: University of Chicago Press.

    Google Scholar 

  • 1979 Manufacturing Consent. Chicago: University Press.

    Google Scholar 

  • 1985 The Politics of Production. London: New Left Books.

    Google Scholar 

  • Deaton, D. R. andP. B. Beaumont 1980 “The determinants of bargaining structure: Some large scale survey evidence for Britain.” British Journal of Industrial Relations 18:202–216.

    Google Scholar 

  • Dow, Gregory K. 1985 “Internal bargaining and strategic innovation in the theory of the firm.” Journal of Economic Behavior and Organization 6:301–320.

    Google Scholar 

  • Doeringer, Peter B. andMichael J. Piore 1971 Internal Labor Markets and Manpower Analysis. Lexington, MA: Heath.

    Google Scholar 

  • Edwards, Richard C. 1979 Contested Terrain. New York: Basic.

    Google Scholar 

  • Feuille, Peter, Wallace Hendricks, andLawrence M. Kahn 1981 “Wage and nonwage outcomes in collective bargaining: Determinants and tradeoffs.” Journal of Labor Research 2:39–53.

    Google Scholar 

  • Freeman, Richard B. 1981 “The effect of unionism on fringe benefits.” Industrial and Labor Relations Review 34:489–509.

    Google Scholar 

  • 1979 “New estimates of private sector unionism in the United States.” Industrial and Labor Relations Review 32:143–174.

    Google Scholar 

  • 1984 What Do Unions Do? New York: Basic Books.

    Google Scholar 

  • Giddens, Anthony 1975 The Class Structure of the Advanced Societies. (1973*) New York: Harper & Row.

    Google Scholar 

  • Goldberg, Victor P. 1980 “Bridges over contested terrain: Exploring the radical account of the employment relationship.” Journal of Economic Behavior and Organization 1:249–274.

    Google Scholar 

  • Granovetter, Mark 1985 “Economic action and social structure: The problem of embeddedness.” American Journal of Sociology 91:481–510.

    Google Scholar 

  • Halaby, Charles N. 1988 “Action and information in the job mobility process.” American Sociological Review 53:9–25.

    Google Scholar 

  • Hayek, Friedrich A. 1948 “The use of knowledge in society.” In Individualism and Economic Order. (1945*) Chicago: University of Chicago Press.

    Google Scholar 

  • Hendricks, Wallace E. andLawrence Kahn 1982 “The determinants of bargaining structure in U.S. manufacturing industries.” Industrial and Labor Relations Review 35:181–195.

    Google Scholar 

  • Hodgson, Geoffrey M. 1988 Economics and Institutions. Philadelphia: University of Pennsylvania Press.

    Google Scholar 

  • Jacoby, Sanford 1985 Employing Bureaucracy. New York: Columbia University Press.

    Google Scholar 

  • Kaysen, Carl andDonald F. Turner 1959 Antitrust Policy: An economic and Legal Analysis. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Klein, Benjamin, Rogert G. Crawford, andArmen A. Alchian 1978 “Ventrical integration, appropriable rents, and the competitive contracting process.” Journal of Law and Economics 21:297–326.

    Google Scholar 

  • Marsden, David 1986 The End of Economic Man? New York: St. Martin's.

    Google Scholar 

  • Oberschall, Anthony andEric M. Leifer 1986 “Efficiency and social institutions.” In Ralph H. Turner (ed.), Annual Review of Sociology, Vol. 12:233–253. Palo Alto, CA: Annual Reviews.

    Google Scholar 

  • Perrow, Charles 1986 Complex Organizations: A Critical Essay, 3rd ed. New York: Random House.

    Google Scholar 

  • Quinn, Robert, andGraham Staines 1979 Quality of Employment Survey, 1977: Cross Section. Ann Arbor, MI: Inter-University Consortium for Political and Social Research.

    Google Scholar 

  • Riordan, Michael andOliver Williamson 1985 “Asset specificity and economic organization.” International Journal of Industrial Organization 3:365–378.

    Google Scholar 

  • Rubery, Jill 1987 “Flexibility of labour costs in non-union firms.” In Roger Tarling (ed.), Flexibility in Labor Markets: 59–84. London: Academic Press.

    Google Scholar 

  • Stinchcombe, Arthur L. 1959 “Bureaucratic and craft administration of production.” Administrative Science Quarterly 4:168–187.

    Google Scholar 

  • Stone, Katherine 1975 “The origins of job structures in the steel industry.” In R. C. Edwards, M. Reich, and D. M. Gordon (eds.), Labor Market Segmentation: 27–84. Lexington, MA: Heath.

    Google Scholar 

  • 1977 Characteristics of Major Collective Bargaining Agreements, July 1, 1975. Bulletin No. 1957. Washington, DC: Government Printing Office.

    Google Scholar 

  • 1979 Employment and Earnings, 1909–1978. Washington, DC: Government Printing Office.

    Google Scholar 

  • 1972–1973 1970 Census of Population. Washington, DC: Government Printing Office.

    Google Scholar 

  • 1975 County Business Patterns, 1975. Washington, DC: Government Printing Office.

    Google Scholar 

  • U.S. Department of the Treasury, Internal Revenue Service 1972 Business Income Tax Returns: Statistics of Income.

  • Wachter, Michael L. 1974 “Primary and secondary labor markets: A critique of the dual approach.” Brookings Papers on Economic Activity 5:637–693.

    Google Scholar 

  • Wachter, Michael L. andOliver E. Williamson 1978 “Obligational market and the economics of inflation.” Bell Journal of Economics 9:549–571.

    Google Scholar 

  • Walton, Richard E. andRobert B. McKersie 1965 A Behavioral Theory of Labor Negotiations. New York: McGraw-Hill.

    Google Scholar 

  • 1975 Markets and Hierarchies. New York: Free Press.

    Google Scholar 

  • 1985 The Economic Institutions of Capitalism. New York: Free Press.

    Google Scholar 

  • Williamson, Oliver E., Michael L. Wachter, andJeffrey E. Harris 1975 “Understanding the employment relation: The analysis of idiosyncratic exchange.” Bell Journal of Economics 6:250–278.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Sociology, Cornell University, 14853-7601, Ithaca, New York

    David L. Weakliem

Authors
  1. David L. Weakliem
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Weakliem, D.L. The employment contract: A test of the transaction cost theory. Sociol Forum 4, 203–226 (1989). https://doi.org/10.1007/BF01112421

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF01112421

Key words

Search

Navigation